FinTech and Blockchain Law Watch – Page 31 – At the Crossroads of Law, Innovation and Commerce

Meet us at the Money20/20 Asia Roadshows in Sydney and Melbourne

Nov 16 2017

Ahead of the Money20/20 Asia conference in March 2018, Money20/20 Asia is partnering with FinTech Australia to showcase the latest FinTech insights of 2017 through a series of Australian Roadshows.

K&L Gates is pleased to be involved with Jim Bulling, Partner, and Daniel Knight, Senior Associate, as panellists at the Sydney and Melbourne Roadshows, respectively.

In Sydney, Jim and his fellow panellists will discuss ‘Data Protection Beyond Identity’, while in Melbourne, Daniel will be part of a panel discussion on ‘The Rise And Fall of Faster Payments Infrastructure’.

Details for each Roadshow can be found below along with registration links for the free events. We hope to see our fellow FinTech enthusiasts there!

BaFin publishes a consumer warning for ICOs

Nov 16 2017

By Judith Rinearson and Rizwan Qayyum

Echoing thoughts from the FCA recently, Germany’s Federal Financial Supervisory Authority (BaFin) issued a formal warning to investors and consumers in general to steer clear of ICOs on the grounds that they constitute “highly speculative investments” that contain “substantial risks”

BaFin notes: “Investors should be aware that a total loss of their investment is possible”, whilst further it added that the huge public interest in the tokens “also attracts fraudsters.” This is very reminiscent of language from the FCA earlier this year.

FCA’s New Consumer Consultation

Nov 13 2017

By Jonathan Lawrence

The UK Financial Conduct Authority (FCA) has launched a new consultation entitled Our Future Approach to Consumers. In the accompanying paper, the FCA recognises that FinTech is bringing new firms into the market and developing far more efficient ways for consumers to save, borrow and invest. The FCA must strike a balance between promoting better outcomes for consumers while not compromising on consumer protection or the standards expected from firms. The FCA also need to set frameworks that ensure markets work well. An example is the New Bank Start-up Unit, run jointly by the Prudential Regulation Authority (PRA) and the FCA. This Unit provides new banks with the information and materials they need to navigate the process of becoming a bank, and tailored supervisory resource during the early years post-authorisation. Since its launch in January 2016, the Unit has helped ten applicants gain authorisation with a range of products, from mobile-only and technology-driven to a new clearing bank, and many new banks have been authorised.

IMF Views on FinTech

Nov 13 2017

By Jonathan Lawrence

In a speech in New York on 1 November, Dong He, Deputy Director, Monetary and Capital Markets Department at the International Monetary Fund (IMF) talked about three main themes:

the economic framework on how FinTech applications will affect financial services and the market structure;
the current landscape of cross-border payments, and the possible evolution of cross-border payment systems; and
the role of central banks, themselves, and the possible reasons for them to issue their own digital currencies.

Mr He’s speech was based on two IMF staff discussion notes, Virtual Currencies and Beyond: Initial Considerations and Fintech and Financial Services: Initial Considerations.

Newly Released Virtual-Currency Businesses Act Augurs Increased State Regulation of Bitcoin, Ether, and other Digital and Crypto Currencies

Nov 09 2017

By Jeremy M. McLaughlin

On October 9, 2017, the Uniform Law Commission released the final version of its Uniform Regulation of Virtual-Currency Businesses Act (“VCBA”). The Act repeatedly references both state money transmission laws and Financial Crimes Enforcement Network money services business regulations, noting that the VCBA is intended to provide protections and obligations that are generally similar to those legal regimes.

Initial Coin Offerings: Key Considerations You Absolutely, Positively Need to Know About Before Launching an ICO

Nov 08 2017

By Edward Dartley, Anthony R.G. Nolan, Mary Burke Baker, John ReVeal and Amanda M. Katlowitz

Initial Coin Offerings (ICOs) have rapidly emerged as the hottest trend in FinTech financing, albeit one that is not without controversy. Put simply, an ICO is a method of fundraising somewhat akin to an initial public offering of securities, except that in an ICO, the fundraiser uses blockchain technology to issue customized cryptocurrencies (commonly known as coins or tokens), typically in exchange for other established cryptocurrencies such as Bitcoin and Ether. The proceeds of an ICO can provide kick-start funding to develop the technology and platforms for the token holder’s access. An ICO that is properly conceived and structured can provide relatively easy transferability of tokens and the potential for those tokens to be traded on exchanges or resold and converted to government-issued legal tender, also known as fiat currency.

The dramatic rise in value of Bitcoin, Ether, and other cryptocurrencies in recent months has generated great interest in this new form of financing, with new players entering the market literally every day and raising millions in new financing in very short offering times. At the same time, ICOs raise a myriad of complex legal issues in the United States and around the world.

To read more, click here.

Australian Government releases proposal for new and improved sandbox

Nov 01 2017

By Michelle Chasser and Felix Charlesworth

On 24 October 2017, the Federal Government released draft legislation and regulations (Draft Bill) enhancing the existing regulatory sandbox for current and emerging FinTech products and services.

This comes almost one year after the Australian Securities and Investments Commission (ASIC) established a sandbox which granted particular exemptions to FinTech businesses from obtaining an Australian Financial Services Licence (AFSL) and/ or an Australian Credit Licence (ACL) if certain conditions were met.

As projected in the 2017/2017 Federal Budget, the enhanced sandbox will expand the types of permissible activities and testing timeframe beyond the existing sandbox parameters established by ASIC. The purpose of this enhanced sandbox is to further promote Australia’s FinTech capability by supporting start-ups and innovative businesses to develop, test and launch their financial and credit services.

Wall Street banks face threat from Silicon Valley: McKinsey

Oct 31 2017

By Rick Giovannelli

Last week McKinsey published its 2017 Global Banking Annual Review, which is summarized in this Business Insider article. The headline on that article is the title of this post and is both accurate and an understatement of the risks of technological and relationship disruption facing banks. This was a major topic of conversation at last week’s Money 20/20 conference, of which K&L Gates was a sponsor and which drew more than 10,000 attendees.

“True Lender” litigation heats up: small business sues marketplace lender and partner bank, alleging conspiracy to evade usury laws

Oct 30 2017

By David D. Christensen and Jennifer Janeira Nagle

Over the last several years, a number of U.S. state and federal government enforcement actions have challenged the viability of the bank partnership model that many marketplace lenders have used to fund consumer and small business loans. Specifically, regulators have argued that, in partnerships where the non-bank entity controls much of the funding process or the bank has little-to-no risk of loss, the non-bank entity is the “true lender.”

A U.S. BitLicense? OCC Acting Comptroller Sounds Open to It

Oct 26 2017

By Eric A. Love and Hilda Li

In remarks delivered during a recent FinTech conference at the Federal Reserve Bank of Philadelphia, U.S. Office of the Comptroller of the Currency (OCC) Acting Comptroller Keith Noreika signaled that he is open to cryptocurrency companies applying for an OCC-issued FinTech charter. According to the Acting Comptroller, part of the OCC’s role is to determine whether issuance of such a charter to cryptocurrency companies is consistent with the OCC’s “statutory obligations.” He cautioned that, “just because you get in the door, doesn’t mean you get out the door on the other side with a charter.” Video of the Acting Comptroller’s full remarks can be viewed here.