FinTech and Blockchain Law Watch – Page 39 – At the Crossroads of Law, Innovation and Commerce

Pilot program to use blockchain to trade electricity

Jun 28 2017

AGL is currently undertaking a trial to test whether blockchain technology can assist in creating a mechanism for users to trade surplus electricity generated from rooftop solar panels. This trial will use customer data generated from a previous AGL project involving the use in households of smart air conditioners, batteries and solar panels to simulate peer-to-peer trading, demonstrating what trades would have taken place and the value they would have generated.

It is possible that ‘smart contracts’ could automatically sell excess energy in real time to other users when excess energy from solar panels is generated. The use of blockchain in this way could help individual households to trade their own energy more efficiently, making renewable energy more affordable and better integrated with power grids. This is a relatively novel application of blockchain technology, which is the distributed ledger technology underpinning the digital currency Bitcoin.

Cryptocurrencies becoming more mainstream?

Jun 19 2017

By Jim Bulling and Michelle Chasser

Steps have been taken this year in Japan and Norway towards the integration of digital currencies such as Bitcoin into the mainstream financial sector. Japan has amended financial laws to include coverage of digital currencies as a type of ‘prepaid payment instrument’, and an online bank in Norway has announced plans to offer clients the ability to link their bank accounts with cryptocurrency accounts.

UK P2P lending platform to launch Innovative Finance ISA

Jun 19 2017

By Jacob Ghanty and John Van Deventer

RateSetter, a UK P2P lending platform, has raised £13 million in its latest round of fundraising as it prepares to launch its “innovative finance” ISA (IF-ISA). The IF-ISA allows investors, or lenders, to earn interest free of income tax. Before a P2P platform can offer its own ISA, it must be fully authorised by the Financial Conduct Authority (FCA).

This comes at a time of increased regulatory scrutiny of the P2P lending sector. There is growing frustration in the industry at the prolonged regulatory approval process for IF-ISAs. This is a function of high numbers of applications before the FCA and a high level of regulatory scepticism over this type of product.

U.S. Regulation CC amendments reallocate risks for remote deposit check payments

Jun 19 2017

By John ReVeal

More than three years after proposing amendments to the Regulation CC to add new indemnities for remotely deposited checks (cheques), new warranties for electronic checks and electronic returned checks and new indemnities for electronically-created items, the U.S. Federal Reserve has at last issued final rules. These new rules also modify the expeditious return rules, including by making electronic returned checks subject to those requirements. The final rules were issued on May 31, 2017, and will take effect on July 1, 2018.

Perhaps the rules of most importance to the banking and emerging payments industries are those providing for indemnities for remotely deposited checks. An inherent problem with remote deposits is that the person depositing the check retains the original paper check and can negligently or intentionally deposit or cash it again. The bank on which the check is drawn will usually refuse to pay it twice, as it should. This leaves the writer of the check, the bank that accepted the remote deposit, and the bank or check cashing store that accepted the original paper check arguing over who should take the loss. Under current rules, unless the parties have entered into side agreements to allocate losses, the bank or check store paying the original check can normally bring a Uniform Commercial Code (UCC) holder-in-due-course claim against the check writer and that person has no remedy unless recovery is possible from the negligent or crooked payee that cashed the item twice.

To read the full alert, click here.

Going Dark: The use of anonymizing technologies in Dark Web crimes

Jun 18 2017

Like an iceberg, the majority of the internet is concealed from plain sight. The “Dark Web,” or websites and content that use anonymizing networks to provide untraceable access to unindexed sections of the web, comprises a segment of what lies beneath that which is visible through a Google search. Cliff Histed and Nicole Mueller contributed an article to American Lawyer on this topic. The article contains insight into the concerns shared by former FBI Director, James Comey, as well as European law enforcement authorities.

To read the article, click here.

UK industry-led sandbox consultation report

Jun 15 2017

By Jonathan Lawrence

The UK Financial Conduct Authority (FCA) asked Innovate Finance to chair a consultation on an ‘industry-led sandbox’. Innovate Finance is an independent not-for-profit membership association representing the UK’s global FinTech community. A report on their consultation on this industry sandbox has been published.

For the purposes of the consultation, an ‘industry sandbox’ was defined as ‘a shared off-market development environment where developers of FinTech solutions can access data, technologies, and services from different providers in order to validate innovative ideas or address common industry challenges‘. This sandbox would be set up and run by the industry to enable technology business to test their solutions (either virtually or live with limited participants) before they reach the market. It would also allow businesses and regulators to collaborate on developing the UK FinTech industry.

Banks moving to improve consumer data sharing

Jun 13 2017

By Susan P. Altman

Banks are actively responding to consumer demand for convenient, high quality banking services by making it more appealing for consumers to share their personal information. A recent article in American Banker discusses announcements by Spanish banking group BBVA and Bank of America of new efforts to provide rich supplies of customer data to third party developers and others.

BBVA announced the launch of its open banking program to make eight of its application programming interfaces (APIs) available to developers, who would in turn create new value added services. The new services are expected to provide enhanced customer experiences by improving conversion, onboarding processes, payment management, identity verification, and consumer analytics, among other things. The new applications based on these APIs are only granted access to personal consumer information if the customer expressly accepts the service’s activation, thereby letting the consumer control with whom they want to share their data. The open APIs strategy is a key element of BBVA’s efforts to become an innovation engine for other companies to develop uses which never would have occurred to the bank acting alone. The program is currently available in Spain, with rollout in the U.S. coming later this year, followed by additional country rollouts.

Silk Road website founder loses appeal of conviction and life sentence

Jun 05 2017

By Nicole C. Mueller and Clifford C. Histed

On May 31, 2017 the United States Court of Appeals for the Second Circuit unanimously affirmed the conviction and life imprisonment of Ross Ulbricht for drug trafficking and crimes associated with his creation and operation of the online marketplace known as Silk Road. Among others challenges, Ulbricht argued on appeal that he should have been allowed to introduce evidence regarding former government agents who pled guilty to stealing Bitcoins as they investigated Silk Road and Ulbricht. The Second Circuit disagreed, finding that while “the shocking personal corruption of these two government agents disgraced the agencies for which they worked,” it had nothing to do with whether Ulbricht operated Silk Road. The Second Circuit similarly found Ulbricht’s other arguments unavailing, namely that (1) the government’s violated his Fourth Amendment rights through the use of pen registers and trap and trace devices to monitor IP addresses associated with internet traffic to and from Ulbricht’s wireless home router, and the search and seizure of his laptop and Facebook, Google accounts; (2) he was denied a fair trial due to the preclusion of certain testimony and evidence; and (3) it was improper for the court to consider six drug-related deaths relevant to his sentencing.

ASIC proposes next steps on RegTech

Jun 05 2017

By Jim Bulling and Michelle Chasser

ASIC is ramping up its focus on regulatory technology (RegTech).

On Friday 26 May 2017, ASIC released its Report 523 titled “ASIC’s Innovation Hub and our approach to regulatory technology”. This report gives an update on the work of ASIC’s Innovation Hub and outlines ASIC’s current and proposed future approach to RegTech.

The report defines RegTech as the use of new technologies to solve regulatory and compliance requirements more effectively and efficiently. These technologies could include use of artificial intelligence, natural language processing, data reporting, regulatory codification and big data analysis technologies.

Financial Action Task Force FinTech and RegTech Forum

Jun 05 2017

By Jonathan Lawrence

The Financial Action Task Force (FATF) has published a summary of its FinTech and RegTech Forum, which was held on 25 and 26 May 2017 in San Jose, California. The FATF is an intergovernmental organisation founded in 1989 on the initiative of the G7 to develop policies to combat money laundering. At the forum over 150 representatives discussed significant trends and developments in FinTech and RegTech and shared their experiences in adapting their practices to continue to identify and mitigate the different money laundering (ML) / terrorism financing (TF) risks brought about by these developments.