Global Fintech & Payments Blog

US Infrastructure Law: Top Impacts on the Digital Asset Industry

Posted in Cryptoassets

The industry will have two years to learn the new requirements and develop systems to ensure compliance.

By Elena Romanova, Stephen P. Wink, Adam Zuckerman, and Deric Behar

On November 15, 2021, President Biden signed the US$1.2 trillion Infrastructure Investment and Jobs Act into law (the Law). Two provisions of the Law could have a wide-ranging impact on the digital asset industry: (i) the Law includes a broad definition of “digital asset,” and (ii) the Law redefines “broker” to include certain persons providing services to transfer digital assets. Continue Reading

PWG Issues Clarion Call for US Legislation on Stablecoins

Posted in Cryptoassets

The report addresses the market risks and regulatory challenges presented by stablecoins and urges Congress to act quickly.

By Alan W. Avery, Yvette D. Valdez, Stephen P. Wink, Pia Naib, and Deric Behar

On November 1, 2021, the President’s Working Group on Financial Markets (PWG) in conjunction with the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC) published its long-anticipated Report on Stablecoins (the Report). Regulators worldwide have become acutely aware of how stablecoins function as a bridge between traditional financial markets and digital asset markets. As a result, regulators are seeking to address the risks, opportunities, and regulatory gaps presented by this burgeoning asset class.

The Report first describes how payment stablecoins function, before identifying key gaps in prudential authority over stablecoins in the US financial system. It then presents recommendations for addressing those gaps. Continue Reading

CNIL Publishes White Paper on Digital Payments and Data Privacy

Posted in Data Privacy, Cybersecurity, and AI, Payments

The French Data Protection Authority’s white paper discusses how companies can comply with data privacy and security obligations.

By Christian F. McDermott, Myria Saarinen, Calum Docherty, Charlotte Guerin, Jiou (Alex) Park, and Amy Smyth

The use of card, contactless, and innovative digital payment solutions has significantly increased in recent years, fueled by the immediate impacts of the ongoing COVID-19 pandemic and the longer-term growth of e-commerce and open banking. In this context, the legal and regulatory environment around payment data is no longer limited to traditional actors in the banking sector or the long-established ambit of banking secrecy rules. As such, stakeholders from fintech startups to established technology giants face an increasing patchwork of compliance obligations. Continue Reading

DOJ and Treasury Take Crypto Enforcement to the Next Level

Posted in Cryptoassets

The DOJ’s National Cryptocurrency Enforcement Team and Treasury’s OFAC are setting their sights on cryptocurrency use in cybercrimes.

By Benjamin A. Naftalis, Eric S. Volkman, Douglas K. Yatter, Nima H. Mohebbi, Jessie R. Michelin, and Deric Behar

The US Department of Justice (DOJ) is sharpening its focus on combatting cryptocurrency use in criminal activity. On October 6, 2021, the DOJ announced the creation of a National Cryptocurrency Enforcement Team (NCET) — a unit aimed to be the centerpiece in “a nationwide enforcement effort to combat the use of cryptocurrency as an illicit tool.” The DOJ identifies cryptocurrency as the “primary demand mechanism for ransomware payments” and “preferred means of exchange of value” to facilitate crimes on the dark web. The stated purpose of NCET is to conduct complex investigations and prosecutions of criminal misuse of cryptocurrency by individuals and entities operating in the digital asset space.

Underlying NCET is the DOJ Cyber Digital Task Force’s first published report, which highlighted the need to address threats posed by the use of cryptocurrency in cybercrimes, as well as its October 2020 Cryptocurrency Enforcement Framework (the Framework), which highlighted the emerging threats and enforcement challenges posed by cryptocurrency use and infrastructure abuse. In the Framework, the DOJ asserted broad and diverse jurisdiction over crimes involving cryptoassets to pursue violations of US law even if those violations were conducted by individuals or entities based outside the US, so long as those entities maintained a nexus of activity involving US persons (see this Latham post for more information). Continue Reading

BIS Issues Consultation on Stablecoin Regulation

Posted in Cryptoassets

The global central bank cooperative body envisions stablecoins within the context of international standards for payment, clearing, and settlement systems.

By Alan W. Avery, Stuart Davis, Simon Hawkins, Stephen P. Wink, Pia Naib, and Deric Behar

Among the different types of digital assets, global authorities seem most focused on stablecoins.

This concern is the result of a few factors:

–Stablecoin use has ballooned in a very short time, going from less than US$3 billion in market capitalization at the beginning of 2019 to approximately US$130 billion as of October 2021.

–Stablecoins are intimately connected with the financial system because they function as an intermediary between traditional markets and cryptoasset markets.

–Stablecoin arrangements are in many cases opaque regarding the nature of the asset reserves underlying their currency peg.

–Stablecoins remain mostly unregulated.

Understanding and containing the systemic risks in this burgeoning asset class is therefore a top priority for regulators worldwide.

Continue Reading

The Token Safe Harbor Lands on Capitol Hill

Posted in Blockchain, Cryptoassets, Digital

The Clarity for Digital Tokens Act of 2021 would give token issuers the guardrails they need to innovate with far less regulatory anxiety.

By Stephen P. Wink and Deric Behar

US Securities and Exchange Commission (SEC) Commissioner Hester Peirce has always been something of a maverick. She has been a lone dissenting voice on the Commission on many topics, applying her libertarian leanings to question the need for regulations that could hobble free markets or stifle innovation.

Those who follow the digital assets markets also know Commissioner Peirce by her nickname “Crypto Mom,” for her relentless support of digital asset innovation and calls for clear regulatory guidance when she perceives they are lacking. To remedy some of those issues, Commissioner Peirce published a Token Safe Harbor Proposal on February 6, 2020, and reissued a revised version (Proposal 2.0) on April 13, 2021 (previously discussed in this post).

Proposal 2.0 never quite gained traction at the SEC, but it has found an ally in Congress. On October 5, 2021, Representative Patrick McHenry, the ranking member on the House Financial Services Committee, introduced a bill titled the Clarity for Digital Tokens Act of 2021 (the Bill) that substantially embodies Commissioner Peirce’s Token Safe Harbor Proposal 2.0. Continue Reading

New US Digital Assets Bill Casts Wide Net

Posted in Cryptoassets

An ambitious proposal could bring digital assets into the mainstream regulatory fold.

By Yvette D. Valdez, Stephen P. Wink, Adam Bruce Fovent, Adam Zuckerman, and Deric Behar

During an eventful summer for the digital assets industry, it may have been easy to miss US Representative Don Beyer’s introduction of the Digital Asset Market Structure and Investor Protection Act (the Bill) on July 28, 2021. The Bill is perhaps the most promising effort to date by Congress to enact legislation that would address some of the legal ambiguities for digital assets and better define their place within existing financial regulatory structures.

Rep. Beyer described the current legal landscape for digital assets as “ambiguous and dangerous for investors and consumers.” Broadly, the Bill seeks to address deficiencies and/or ambiguities relating to consumer protection, trade reporting and transparency, and anti-money laundering / know your client (AML/KYC) procedures for digital assets.

The Bill also seeks to address a wide range of practical issues, from the fundamental (such as defining industry terms and categorizing cryptoassets) to the more nuanced (such as establishing standards for transaction reporting and consumer protection and advisories). Continue Reading

NFTs and the Right of Publicity: Assessing the Legal Risks

Posted in Cryptoassets, Non-Fungible Tokens

NFT creators should craft strategies to avoid minting or auctioning NFTs that use the likeness of an individual without their consent.

By Ghaith Mahmood, Nima H. Mohebbi, and Tara McCortney

As non-fungible tokens (NFTs) increase in popularity, the so-called common law “right of publicity” may create additional legal risks for NFT minters. The common law right of publicity prevents the commercial exploitation of an individual’s identity without that person’s consent.[1] Most U.S. states have defined a right of publicity and, correspondingly, a standard tort for violation of that right — frequently referred to as the tort of appropriation.

While the law is similar across most US jurisdictions, California — the heart of the entertainment industry — has particularly well-developed authority in this area. For this reason, this blog post focuses on California law in describing the unique issues that NFTs may present. Continue Reading

New SEC Chairman Gives His First Speech on Crypto

Posted in Cryptoassets

Gary Gensler asserts the SEC’s broad powers over digital assets, and puts consumer protection at the forefront.

By Stephen P. Wink, Adam Zuckerman, and Deric Behar

On August 3, 2021, Gary Gensler, chairman of the US Securities and Exchange Commission (SEC), gave a speech on the digital asset industry. The speech offered some indication of what he expects the SEC to focus on in this area but did not provide concrete guidance for industry participants looking for clarity on regulatory uncertainties. He did, however, make clear that he believes “we just don’t have enough investor protection in crypto” and that the SEC will play a more active role in regulating the industry. Continue Reading

The Road Ahead for Open Banking in the US

Posted in Open Finance

A new Executive Order could help open the door for the portability of consumer financial data.

By Charles Weinstein and Deric Behar

Definitive regulation for open banking may be on the horizon in the US. On July 9, 2021, President Biden issued an Executive Order on Promoting Competition in the American Economy (the Order), which contains a section on banking and consumer finance that encourages the Consumer Financial Protection Bureau (CFPB) to issue rules on consumer financial data portability.

The Order’s request to the CFPB could help foster competition and reduce market concentration among banking institutions by simplifying personal data portability for consumers and making open banking functionality more readily available. Continue Reading

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