FinTech and Blockchain Law Watch – Page 27 – At the Crossroads of Law, Innovation and Commerce

Hong Kong regulators take action against cryptocurrency exchanges and ICOs

Feb 12 2018

By Rizwan Qayyum

Hong Kong’s Securities and Futures Commission (“SFC”) have issued formal warnings to seven cryptocurrency exchanges and seven issuers of initial coin offerings. This follows their initial statement on ICOs released on 5 September 2017, and represents their first regulatory action.

The SFC has sent letters to seven cryptocurrency exchanges “in Hong Kong or with connections to Hong Kong”, which provides a warning that they should not be trading cryptocurrencies which are “securities” as defined in the Securities and Futures Ordinance (“SFO”) without a licence. The exchanges responded immediately, either by confirming that they do not provide trading services for such currencies or took rectification measures, including removing relevant cryptocurrencies from their platforms.

Australian Open Banking Developments

Feb 09 2018

By Jim Bulling and Edwin Tan

The Australian Government has today released a report into Open Banking in Australia that sets out recommendations in relation to the method of implementation and proposed timelines. Some key points are:

the Australian Competition and Consumer Commission (ACCC) should be primarily responsible for overseeing standards-setting and accreditation, assisted by the Office of the Australian Information Commissioner for privacy issues;
the obligation to share data should apply to all Australian Deposit-taking Institutions (ADIs) as well as reciprocally for other participating entities;
all ADIs should be automatically accredited to receive data. A risk-based accreditation standard should be used for non-ADIs (this would include most FinTech startups, for example);
the use of Application Programming Interfaces to facilitate data sharing; and
mandatory implementation of “read-only” access should be approximately 12 months from a final Government decision to implement Open Banking for the big 4 banks, with a further 12 months transitory period for other banks.

Plastic – that is so yesterday

Feb 07 2018

By Cameron Abbott and Samantha Tyrrell

Many readers won’t be surprised by a new report out of the US that mobile peer-to-peer (P2P) payment services are now more popular than ever. However, it may be surprising to readers that the flipside of this increase is that our use of plastic money is on the decline, with a future free of debit cards potentially on the horizon.

Cryptocurrency 2018: When the Law Catches Up with Game-Changing Technology

Feb 02 2018

By David E. Fialkow, Edward J. Mikolinksi and Jack S. BrodskyBlockchain technology and the virtual currency, or cryptocurrency, that uses this technology are revolutionizing the way businesses function and deliver goods and services. Even as cryptocurrency becomes a widely debated topic, gaining the critical attention of regulators and policymakers, individuals and businesses are investing billions of dollars in cryptocurrency annually. To understand how blockchain and cryptocurrency may impact you, your business, and your industry, it is important to understand what cryptocurrency is and how the underlying blockchain works. This article provides a brief introduction to these concepts as well as a primer on cryptocurrency legal issues. To read the full article, click here.

The Shoe Finally Drops: CFPB Makes Final Changes to the Prepaid Account Rule and Delays the Effective Date until 2019

Feb 01 2018

By Eric A. Love and Judith Rinearson

On January 25, 2018, the U.S. CFPB announced that it has finalized changes to its sweeping Final Rule governing most general use prepaid accounts, digital wallets and P2P payment programs. These changes have been long anticipated, and include a delay of the Final Rule’s effective date (until April 1, 2019), as well as the following notable features:

Error Resolution and Limited Liability

A major bone of contention for the industry was the fact that provisional re-crediting of claims of unauthorized transactions would be required even if the cardholder had not registered or been verified. Such a requirement would certainly have increased fraud. Under the new amendments, Regulation E’s error resolution and limited liability requirements will not apply until after the consumer identification and verification process has been completed. This new limitation does not apply to payroll cards and government benefit accounts, since these cardholders are usually already known to the issuers.

Starbucks – a trust legitimiser for blockchain?

Feb 01 2018

By Cameron Abbott and Samantha Tyrrell

In a recent quarterly investor call, Starbucks’ Chairman Howard Schultz discussed the possibility of incorporating blockchain technology into Starbucks’ impressive digital repertoire.

Starbucks’ commitment to being a first mover when it comes to disruptive technology has already resulted in the hugely successful implementation of its mobile payment app, launched in 2015. The app allows users to order, pay and accrue rewards remotely and now accounts for nearly one third of Starbucks’ US transactions. According to Schultz, these figures may warrant a move towards integrating some entirely cashless stores throughout the US.

Hacking of digital currency exchange leaves Japanese company footing the bill

Jan 31 2018

By Cameron Abbott and Allison Wallace

Coincheck – one of Japan’s largest digital currency exchanges – says it will repay hundreds of millions of dollars’ worth of virtual money, after hackers broke into its network, stealing a reporting 58 billion yen (AUD660 million) worth of NEM (a cryptocurrency like Bitcoin).

Hackers broke into the Coincheck network early Friday morning, but it wasn’t discovered until nearly eight and a half hours later. Read More

Open Banking: UK Parliamentary Roundtable

Jan 30 2018

By Jonathan Lawrence

The UK All Party Parliamentary Group (APPG) on FinTech and APPG on Alternative Lending will be hosting an invite-only roundtable on Open Banking, taking place on 31 January from 9:00-10.30am at the Houses of Parliament.

Open Banking went live in the UK on 13 January. From this date, the high street banks were required to make their customers’ bank transaction data available to third party businesses when instructed to do so by the customer. This is the first major milestone in a multi-year programme to open all payment products to the market for financial services. Over time, it is expected to revolutionise the way consumers and small businesses use and access financial services.

Open Banking was the main remedy mandated by the UK Competition and Markets Authority (CMA) following its investigation into the supply of personal current accounts and banking services in 2016. The CMA concluded that UK banks do not compete hard enough for customers’ business; and that technology should be employed to enable customers to compare and access better deals from new providers.

The Roundtable will be an opportunity to hear the latest from the Trustee of Open Banking, Imran Gulamhuseinwala, two weeks after the new services went live; and to raise any concerns about the potential for consumer detriment. You can register your interest here.

Digital currency exchange providers, do you need to register with AUSTRAC?

Jan 25 2018

By Jim Bulling and Michelle Chasser

Australian anti-money laundering regulator AUSTRAC has released draft AML/CTF Rules for consultation following recently passed amendments to the Anti-Money Laundering and Counter-Terrorism Financing Act which expand Australia’s AML/CTF regime to digital currency exchanges. The amendments will come into effect from the date of Proclamation which is expected to be 1 April 2018.

Under the amendments exchanging digital currency for money (whether Australian or not) or exchanging money (whether Australian or not) for digital currency, where the exchange is provided in the course of carrying on a digital currency exchange business will attract obligations under the AML/CTF regime. Notably, exchanging one digital currency for another will not be regulated.

UK Islamic FinTech Panel Launched

Jan 25 2018

By Jonathan Lawrence

An independent group of Islamic Finance and FinTech practitioners came together on 24 January for the inaugural meeting of the UK Islamic FinTech Panel. The panel aims to create momentum in the Islamic FinTech sector by building on London’s position as a global FinTech hub and as a recognised centre for Islamic Finance.

The panel will be chaired by Harris Irfan, MD of Cordoba Capital, an Islamic Finance and Islamic FinTech advisory boutique. Irfan was previously CEO of Deutsche Bank’s Islamic Finance subsidiary, Global Head of Islamic Finance at Barclays and Head of Investment Banking at Rasmala Group. A recent white paper on the Islamic Finance sector, published by Cordoba Capital and IslamicBanker, promoted the idea of an Islamic FinTech panel as a means to build a community to work alongside existing public sector infrastructure in order to provide support to sharia-compliant FinTech companies. If you would like a copy of the white paper, please contact Jonathan Lawrence.