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

New Technology Targeting U.S. Loan Market in Attempt to Increase Liquidity

Nov 28 2017

Loan market participants may soon be able to use blockchain technology and tokenized cash to achieve swifter settlement of loan trades. Both Synaps Loans and Finastra plan to introduce new blockchain-based platforms next year. They join the platform created by ClearPar and HIS Markit, which plans to reduce or eliminate wire transfers by promoting tokens that can ultimately be exchanged for cash.

The main objective of the technology is to reduce settlement time. Long settlement times result in costly use of capital and render the market less liquid in the eyes of regulators. The time between the agreement on material terms of the trade and the trade settlement date for syndicated loans is much longer–the median recently was 12 days- than that for other asset classes, such as equities. Several processes, such as implementation of the “delayed compensation” rules to incentivize quick settlement, have attempted to reduce settlement time. However, market protocol requires an exchange of finalized assignment documents among buyer, seller and agent bank, collection of “know-your-customer” information by agent bank, borrower consent, receipt of underlying loan documentation, agent bank verification of loan ownership and transfer of ownership on the loan registry. Even under the best circumstances there are inadvertent delays, including those caused by blackout dates for amendments and absences by workers processing requests.

MAS releases “A Guide to Digital Token Offerings”

Nov 28 2017

By Nicholas Hanna and Samantha See

On 14 November 2017, the Monetary Authority of Singapore (the “MAS”) released “A Guide to Digital Token Offerings” providing general guidance on the application of the securities laws administered by the MAS in relation to offers or issues of digital tokens in Singapore.

The main consideration is whether the digital token is designed in a way that would make it a product regulated under Singapore’s securities laws i.e. if it behaves like a share, debenture or some other form of security. If a token does not function like a security, then technically, neither will the security laws apply.

UK Government Measures for FinTech – Autumn 2017 Budget

Nov 28 2017

By Jonathan Lawrence

The UK Chancellor of the Exchequer, Philip Hammond, included three measures in his 2017 Autumn Budget on 22 November of interest to the FinTech industry:

Regulators’ Pioneer Fund: The aim is to help unlock the potential of emerging technologies. The new £10 million fund is designed to help regulators to develop innovative approaches aimed at getting new products and services to market.
Tech Nation: To secure the position of the UK in digital innovation, the Government will invest £21 million over the next 4 years to expand Tech City UK’s reach – to become ‘Tech Nation’ – and support regional tech companies and start-ups. Tech Nation will roll out a dedicated sector programme for leading UK tech specialisms, including FinTech and Artificial Intelligence. Regional hubs will be located in: Cambridge, Bristol and Bath, Manchester, Newcastle, Leeds and Sheffield, Reading, Birmingham, Edinburgh and Glasgow, Belfast, and Cardiff.
AI: The government plans to create a new Centre for Data Ethics and Innovation, to enable safe, ethical, and ground-breaking innovation in AI and data-driven technologies. This advisory body is designed to work with the Government, regulators, and industry to help lay the foundations for AI adoption. The Government will also invest over £75 million to progress key recommendations of the independent review on AI, create new AI fellowships, and provide initial funding for 450 PhD researchers.

EU supervisor warns about risks of ICOs and calls for regulatory compliance

Nov 22 2017

By Giovanni Campi and Ignasi Guardans

Following the rapidly increasing use of Initial Coin Offerings (ICOs), the European Securities and Markets Authority (ESMA) issued two statements to warn investors on ICOs’ risks and to encourage companies involved in ICOs to comply with the relevant European legislation.

ESMA defines an ICO as “an innovative way of raising money from the public, using coins or tokens”. In an ICO, businesses issue tokens and sell them in exchange for traditional, or more often, virtual currencies like Bitcoin or Ether. The tokens are created and disseminated using distributed ledger or blockchain technology (DLT).

Cryptocurrency CFD Warning

Nov 20 2017

By Jonathan Lawrence

The UK Financial Conduct Authority (FCA) has recently issued a consumer warning about contracts for differences (CFDs), including financial spread bets, with cryptocurrencies as the underlying investment.

CFDs are complex financial instruments which allow speculation on the price of an asset. CFDs are typically offered with leverage which means a consumer only need to put down a portion of the investment’s total value. However leverage also multiplies the impact of price changes on both profits and losses. Cryptocurrency CFDs allow investors to speculate on a change in price of a cryptocurrency such as Bitcoin or Ethereum. They have experienced significant price volatility in the past year which, in combination with leverage, places consumers at risk of suffering significant losses.

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.