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Topic: Fintech

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SEC and FINRA address digital asset custody issues

The unique manner in which digital asset securities are issued, held and transferred makes them inevitably prone to unique concerns compared to traditional securities. As expected, these concerns have triggered conversation among market participants regarding whether and how traditional federal securities laws apply to novel digital asset securities and transactions. On July 8, 2019, the … Continue Reading

FinCEN issues advisory and guidance on virtual currency

On May 9, 2019, the Financial Crimes Enforcement Network (FinCEN), the U.S. anti-money laundering (AML) agency, announced issuance of both Guidance and an Advisory on how transactions involving convertible virtual currencies (CVCs) would be subject to FinCEN’s money services business (MSB) regulations. FinCEN characterized the Guidance as a consolidation of its regulations, previous guidance and … Continue Reading

SEC sues Kik for its US$100m ICO

On June 4, 2019, the Securities and Exchange Commission (“SEC”) filed a complaint against Kik Interactive, Inc. (“Kik”), which owns and operates a mobile messaging application called Kik Messenger, in connection with its 2017 initial coin offering (“ICO”) that raised over $100 million; more than $55 million of which came from U.S. investors. The SEC … Continue Reading

Consensus New York & Blockchain week – key takeaways

Partners from our global FinTech team flew in from Hong Kong, Vancouver, London and Dallas to join our New York team to attend Consensus and Blockchain week in NYC (13-15 May).  Consensus is an annual global conference which brings together the world’s most innovative minds to explore and debate the future of blockchain and crypto. … Continue Reading

No news is good news? The SEC may be undermining innovation in FinTech

On May 9, 2019, SEC Commissioner Hester Peirce delivered a speech at the Securities Enforcement Forum in East Palo Alto, California, discussing the SEC’s impact on the FinTech space and growth of the digital asset industry. Commissioner Peirce admitted her prior prediction, that the SEC would discourage the industry’s growth through hurried regulation and overenthusiastic … Continue Reading

FinCEN fines peer-to-peer virtual currency exchanger for AML violations

On April 18, 2019, the U.S. anti-money laundering (“AML”) agency, the Financial Crimes Enforcement Network (“FinCEN”), announced that it had assessed a civil money penalty of $35,350 against Eric Powers of Kern County, California, for acting as an unregistered money services (“MSB”) business. Mr. Powers also agreed to cease engaging in any activity that might … Continue Reading

New York denies Bittrex a virtual currency license and orders it to cease doing business in New York

A day after the New York State Department of Financial Services (DFS) approved its 19th application for a license or authorization to conduct a virtual currency business in New York, it issued a denial of the application of Bittrex, Inc. (Bittrex) for a DFS BitLicense and a Money Transmitter License. Bittrex had been operating a … Continue Reading

SEC issues first no-action letter for unregulated ICO

On April 3, 2019, the Securities and Exchange Commission (“SEC”) issued its first no-action letter related to the offering and sale of digital tokens. The beneficiary is TurnKey Jet, Inc. (“TurnKey”) which proposes to offer and sell blockchain-based digital assets in the form of “tokenized” jet cards (“Tokens”). The no-action letter, which some see as … Continue Reading

Paying (or not) fees on registered US patents and trademarks in Venezuela in cryptocurrency

Last month, the Venezuelan Ministry of National Commerce issued a notice requiring patent and trademark fees to be paid in the cryptocurrency issued by the Venezuelan government — the Petro, which supposedly is backed by Venezuela’s oil and mineral reserves. As noted in previous posts, the United States has been increasing its economic sanctions on … Continue Reading

Changing securities laws and regulations for the digital token age

While federal courts last year recognized that virtual currencies based on blockchain platforms could qualify as securities and/or commodities, there has been some concern that these regulatory structures may not fit all digital tokens under all circumstances. In a recent New York Law Journal column, Robert Schwinger, a partner in the New York office of … Continue Reading

New virtual currency bills introduced in the U.S. Congress

Two new bills were introduced in the U.S. House of Representatives at the end of January aimed at recommending possible legislative changes to regulate and promote virtual currencies, also known as cryptocurrencies. The first bill, H.R. 922, Virtual Currency Consumer Protection Act of 2019 aims to promote fair and transparent virtual currency markets by examining … Continue Reading

SEC takes aim at digital tokens and smart contracts

On the heels of the first-ever judicial holding this past summer that a cryptocurrency could qualify as a “security” under federal securities laws, the Securities and Exchange Commission (SEC) has brought a wave of new enforcement actions targeting blockchain-based digital token ventures under a variety of provisions in the securities laws. In a recent New … Continue Reading

Commissioner Peirce warns the SEC not to cast Howey’s net too wide

On February 8, 2019, SEC Commissioner Hester Peirce delivered a speech at the symposium ”Protecting the Public While Fostering Innovation and Entrepreneurship: First Principles for Optimal Regulation.” Her remarks, entitled “Regulation: A View from Inside the Machine,” provide insight into how SEC regulators currently view certain technological innovations and how they interpret and apply the … Continue Reading

FINRA to examine member firms’ digital assets activities for compliance with securities laws

On January 22, 2019, the Financial Industry Regulatory Authority (“FINRA”) released its 2019 Risk Monitoring and Examination Priorities Letter (Regulatory Notice No. 18-20) in which it identifies topics FINRA will focus on in the coming year. FINRA indicates that this year the securities self-regulatory organization will review “firms’ activities through its membership and examination process … Continue Reading

US Federal and State legislators propose exempting certain digital tokens from securities laws

On January 4, 2019, two Colorado senators introduced the “Colorado Digital Token Act,” a bill seeking to exempt digital tokens and cryptocurrencies from certain Colorado state securities laws. In filing the Colorado Digital Token Act, the senators proposed that digital tokens with a “primarily consumptive purpose” that are not marketed to be used for “speculative … Continue Reading

Personal jurisdiction in the age of blockchain

As commercial activity increasingly intertwines with applications of blockchain technology with participants around the world, courts have had to grapple with the personal jurisdiction implications of such arrangements. Will participants in these blockchain applications based outside the United States find themselves subject to U.S. jurisdiction when disputes arise, based on how they have conducted their … Continue Reading

Transition period under New York cybersecurity regulation ends March 1, 2019

The two-year transitional period under the New York State Department of Financial Services (“DFS”) Cybersecurity Regulation, 23 NYCRR 500 (the “Regulation”), will expire on March 1, 2019, with the final remaining requirement becoming effective. Entities covered by the Regulation that utilize third party service providers, which include not only banks and insurers, but also other … Continue Reading

New bipartisan bills aim to regulate and promote blockchain and cryptocurrencies

Legislation has been introduced in the US House of Representatives directed at regulating virtual currency.  In a post from the Norton Rose Fulbright Project Finance blog available, Deanne Barrow analyzes the bills. Readers interested in learning more about cryptocurrency can sign up for updates on our FinTech law and regulation page.… Continue Reading

CFTC seeks public comment on crypto-asset mechanics and markets

The Commodity Futures Trading Commission (“CFTC”) published a Request for input on December 17, 2018, seeking public comment and feedback on a set of twenty-five (25) questions to better inform the CFTC’s understanding of the technology, mechanics, and markets for virtual currencies beyond Bitcoin. … Continue Reading

Banking agencies and FinCEN encourage innovative efforts by banks to combat money laundering and terrorist financing

On December 3, 2018, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the National Credit Union Administration, the Office of the Comptroller of the Currency, and the Financial Crimes Enforcement Network (“FinCEN”), (collectively, the “Agencies”) issued a joint statement (“Joint Statement”) urging banks to consider, evaluate and potentially implement … Continue Reading

SEC issues statement on digital asset securities issuance, investment and trading

On November 16, 2018, the Securities and Exchange Commission (“SEC”) issued a statement on the application of federal securities laws to the issuance and trading of, and investment in, digital asset securities. While the statement encourages technological innovations that benefit investors and capital markets, it emphasizes that market participants must still adhere to federal securities … Continue Reading

SEC announces first enforcement action against EtherDelta for operating an unregistered exchange for ERC20 digital tokens

On November 8, 2018, the Securities and Exchange Commission (“SEC”) announced that it settled charges against Zachary Coburn, founder of EtherDelta, a digital token trading platform, for operating an unregistered national securities exchange. This is the SEC’s first enforcement action based on findings that a digital token trading platform operated as an unregistered national securities … Continue Reading

What auditors need to know about the blockchain

Yet another U.S. regulator has weighed in on the use of the blockchain. The Public Company Accounting Oversight Board (PCAOB) is a nonprofit corporation established by the U.S. Congress to oversee the audits of public companies in order to protect investors and the public interest by promoting informative, accurate and independent audit reports. The PCAOB … Continue Reading

Alibaba successful in temporarily shutting down third party using its name to sell “AlibabaCoin”

On October 22, 2018, a U.S. federal trial court in Manhattan granted web services conglomerate Alibaba Group Holding Limited’s request for a preliminary injunction against several defendants that were offering cryptocurrency for sale, under the name “AlibabaCoin.” (Alibaba Group Holding Ltd. v. Alibabacoin Foundation, No. 18-CV-2897 (JPO) (S.D.N.Y. Oct. 22, 2018) Although neither Alibaba nor … Continue Reading
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