Global FinTech & Payments Blog

UK FinTech State of the Nation Report Highlights UK’s Leading Position

Posted in Investing in FinTech

Report highlights key strengths and regulatory innovations to inform stakeholders for trade and investment.

By Laura Holden and Nootan Vegad

The Department for International Trade, with the support of Innovate Finance, has published a report titled the “FinTech State of the Nation”. Providing an overview of the UK’s FinTech industry and highlighting the UK’s appeal as a FinTech destination for entrepreneurs and investors, the report seeks to demonstrate how the UK’s FinTech sector has emerged as a global leader and why this will continue in the future.

The report describes the actions that the government, regulators, and industry have taken to stimulate and sustain growth of the UK’s FinTech sector. The report includes an overview of technology demand, a regional analysis of FinTech, details of the investment environment, views from the FCA, a summary of the talent, skills, and diversity in the industry and the “Essential Eight” technology trends — which includes block chain, drones, and artificial intelligence to name a few. Continue Reading

FCA Outlines Key Deadlines for PSD2 Compliance

Posted in Data Privacy, Cybersecurity, and AI, Payments

As several PSD2 deadlines approach, PSPs must comply with reporting and notification requirements, as well as with their GDPR obligations.

By Christian F. McDermott, Fiona M. Maclean, and Jagveen Tyndall

Though the majority of the provisions relating to the revised EU Payment Services Directive (PSD2) came into force in the UK on 13 January 2018, the regulatory technical standards (RTS) and strong customer authentication measures (SCA) will come into force on 14 September 2019. The FCA has issued a helpful reminder setting out some important deadlines that payment service providers (PSPs) must meet to be compliant.

Application Programme Interfaces

PSD2 allows third party providers (TPPs) to build payment service infrastructures upon the existing platforms of financial institutions; such institutions must provide TPPs with access to client account information via open application programme interfaces (APIs). Financial institutions seeking to enable such access can do so by either constructing dedicated interfaces built on these APIs or through adjusting existing customer interfaces. In both instances, such interfaces and their accompanying customer authentication measures must be in place by 14 September 2019. Continue Reading

To Charter or Not to Charter? Federal Judge Presses Pause on the OCC’s Plans

Posted in Digital, Investing in FinTech, Payments

Federal court allows NYSDFS lawsuit against OCC FinTech charter to proceed, raising further questions about the charter’s viability.

By Alan W. Avery, Todd Beauchamp, Loyal T. Horsley, Pia Naib, and Charles Weinstein

In a May 2 order, US District Court Judge Victor Marrero rejected the Office of the Comptroller of the Currency’s (OCC’s) recent motion to dismiss the New York State Department of Financial Services’ (NYSDFS’) new lawsuit challenging the OCC’s FinTech charter, and by doing so, may have put the charter in limbo for the foreseeable future.


As detailed in this previous commentary, the NYSDFS’ then-Superintendent Maria T. Vullo sued the OCC and then-Acting Comptroller Keith Norieka in response to the OCC’s 2016 White Paper — “Exploring Special Purpose National Bank Charters for Fintech Companies.” Superintendent Vullo and the NYSDFS alleged that granting the proposed charter was outside the scope of the OCC’s statutory authority and would be harmful to the US financial system. The suit, however, was dismissed, primarily on the grounds that it was premature given the OCC had not yet taken any official action on the chartering process (i.e., the OCC had only released the White Paper). Following the dismissal of the NYSDFS suit, as well as the dismissal of a similar suit brought by the Conference of State Bank Supervisors, the OCC issued a policy statement in July 2018 announcing that it would begin accepting applications for special purpose national bank (SPNB) charters for non-depository FinTech companies. In the wake of this more formal movement on the FinTech charter, Superintendent Vullo again sued the OCC and the new Comptroller, Joseph Otting, in September 2018, seeking to block the OCC from taking further action to implement the chartering process. The OCC moved to dismiss the new NYSDFS suit, arguing that the claims were still premature because the OCC had not yet received — let alone approved — any FinTech charter applications.

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FinCEN Brings First Action Against a P2P Virtual Currency Exchanger

Posted in Cryptoassets, Payments

The enforcement action serves as a reminder that virtual currency exchangers, regardless of size, must comply with the BSA.

By Todd Beauchamp and Charles Weinstein

The US Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) does not care if you are a multinational corporation or an individual operating out of your garage; regardless of size, if you violate the Bank Secrecy Act (BSA), you are fair game for enforcement. The financial services industry was reminded of this recently when FinCEN announced that it had assessed a civil money penalty against an individual for “willfully violating the [BSA’s] registration, program, and reporting requirements.”

The matter involved a single individual, Eric Powers, who solicited purchases and sales of bitcoin on the internet, and completed those transactions with other individuals in person, through the mail, and by wire. FinCEN claimed that Powers’ activity included executing around 160 purchases of bitcoin for approximately US$5 million through in-person cash transactions with individuals he met through a bitcoin forum. In connection with Powers’ virtual currency-related activity, FinCEN asserted that Powers operated as a peer-to-peer (P2P) exchanger of convertible virtual currency, and thus, as a “money transmitter” under the BSA. Continue Reading

US Digital Asset Bills: Will April Legislation Bring May Flowers?

Posted in Cryptoassets

Federal legislators introduce two bills in an attempt to provide the blockchain economy with regulatory certainty.

By Stephen P. Wink, Morgan E. Brubaker, Cameron R. Kates, and Shaun Musuka

US regulators and federal legislators may be heeding the calls of crypto-enthusiasts for legal clarity regarding the status of digital assets and cryptocurrencies (collectively, Tokens). Two weeks ago, the Securities and Exchange Commission (SEC) released an analytical framework for determining when a Token constitutes a security. Last week, US federal legislators followed up by introducing two bills that are designed to “provide regulatory certainty for businesses, entrepreneurs, and regulators in the US’ blockchain economy,” the Token Taxonomy Act of 2019 (H.R. 2144) (TTA) and the Digital Taxonomy Act of 2019 (H.R. 2154) (DTA, and together with the TTA, the Bills).

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Russian Civil Code Recognizes Digital Rights and Smart Contracts

Posted in Cryptoassets

The new legislation may act as a catalyst for a crypto-evolution within Russian law.

By Andrew C. Moyle and Elizaveta Bacheyeva

On 18 March 2019, the Russian legislator took the first step in introducing the Russian civil law system to the new universe of digital assets. The Russian Civil Code was amended to include concepts of digital right and smart contracts, and the legislator also recognized digital rights as an independent object of civil law regulation.

By way of background, the Russian civil law system is based on laws rather than precedents, and — unless a particular concept is explicitly mentioned in the legislation — then the concept is non-existent for civil law regulation and falls outside any legal protection. Prior to these amendments to the Civil Code, digital assets or cryptocurrencies did not fall within any category of assets recognized by the Civil Code, and there was much uncertainty on how these digital asserts were regulated and how transactions with such assets should be structured. In one instance, a Russian court failed to recognize Bitcoin as an asset and, on those grounds, refused to include the Bitcoin in a debtor’s insolvency estate.

These amendments to the Civil Code will come into force on 1 October 2019 and will apply to all transactions made after that date. The new legislation is only the starting point for a crypto-evolution within Russian law, as the Russian legislator is currently considering two draft laws “On digital finance assets” and “On crowdfunding.” These laws would provide more in-depth regulation of cryptocurrencies, tokens, and investments through digital platforms. Continue Reading

UK’s Proposed “Online Harms” Compliance and Enforcement Regime Will Target Platforms

Posted in Digital

UK publishes White Paper with hard-hitting regulatory proposals to tackle online harms.

By Alain Traill, Stuart Davis, Andrew Moyle, Deborah Kirk and Gail Crawford

On 8 April 2019, the Home Office and the Department for Culture, Media and Sport (DCMS) published an “Online Harms White Paper”, proposing a new compliance and enforcement regime intended to combat online harms. The regime is designed to force online platforms to move away from self-regulation and sets out a legal framework to tackle users’ illegal and socially harmful activity. Although the regime appears to target larger social media platforms, the proposals technically extend to all organisations that provide online platforms allowing user interaction or user-generated content (not limited to social media companies or even ‘service providers’ in the traditional sense) and set out a potentially onerous and punitive compliance and enforcement regime for a broad set of online providers. Continue Reading

New SEC Token Guidance: This Is Howey Do It

Posted in Cryptoassets

The SEC provides additional guidance for analyzing whether a digital asset is a security.

By Stephen P. Wink, Cameron R. Kates, and Shaun Musuka

On April 3, 2019, the U.S. Securities and Exchange Commission’s Strategic Hub for Innovation and Financial Technology (the SEC) released a framework (the Framework) for assessing whether a blockchain-issued token or digital asset (each, a Token) constitutes an investment contract. An investment contract is an enumerated type of security subject to US federal securities laws. The Framework does not have the force of law, but rather, provides additional guidance on the factors to consider when applying the Howey test to Tokens. For background regarding the Howey test, please see Latham’s Client Alert. Latham’s read of the Framework suggests two key takeaways. First, it provides added insight into how existing Tokens may be reevaluated over time and may cease to be subject to federal securities laws. Second, it offers the clearest guidance to date that Tokens that are designed and marketed as purely “virtual currency” should not be considered securities. Continue Reading

Are You My Regulator? ABA Surveys US Crypto Regulatory Overlap

Posted in Cryptoassets

A new white paper explores jurisdictional conflicts and the regulatory status of digital assets.

By Yvette D. Valdez, J. Ashley Weeks, and Jacqueline M. Rugart

Members of the American Bar Association’s (ABA’s) Derivatives and Futures Law Committee recently published a white paper exploring the US regulatory landscape for digital assets (White Paper), including a 50-state survey and overview of certain non-US crypto regulatory regimes. The White Paper primarily focuses on the jurisdictional overlap between the US Commodity Futures Trading Commission (CFTC) and the US Securities and Exchange Commission (SEC) pertaining to the regulation of digital assets.

Latham & Watkins lawyers previously discussed the intersection of CFTC and SEC regulatory jurisdiction in the crypto context here and here.

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First Virtual Bank Licenses Granted in Hong Kong

Posted in Digital, Investing in FinTech

The HKMA has issued three virtual banking licenses as part of its broader initiatives to develop the local banking industry.

By Simon Hawkins and Kenneth Hui

The Hong Kong Monetary Authority (HKMA) recently announced the issuance of the first virtual banking licenses to three entities.

Virtual banks in Hong Kong are banks that primarily deliver retail banking services through the internet or other electronic channels, instead of through physical branches.

The HKMA previously issued a press release on 7 December 2018 announcing that there had been around 30 virtual banking applications as of the end of August 2018, and the HKMA had shortlisted a third of the applications for the next stage of assessment. Continue Reading