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On April 3, 2019, staff of the Securities and Exchange Commission released (1) a framework providing principles for analyzing whether a digital asset constitutes an investment contract, and thus a security, as defined in SEC v. W.J. Howey Co. and (2) a no-action letter permitting TurnKey Jet, Inc., without satisfying registration requirements under the Securities Act of 1933 and the Securities Exchange Act of 1934, to offer and sell “tokenized” cards that are recorded on a permissioned…
On February 20, the Securities and Exchange Commission (the “SEC” or “Commission”) issued a cease-and-desist order against Gladius Network LLC (“Gladius”) concerning its 2017 initial coin offering (“ICO”).  The SEC found that the Gladius ICO violated the Securities Act of 1933’s (“Securities Act”) prohibition against the public offer or sale of any securities not made pursuant to either an effective registration statement on file with the SEC or under an exemption from registration.[1] …
On November 16, 2018, the U.S. Securities and Exchange Commission (“SEC”) Division of Corporation Finance (“Corp. Fin.”), Division of Investment Management, and Division of Trading and Markets issued a joint public statement on “Digital Asset Securities Issuance and Trading.”  The public statement is the latest in the Divisions’—and the Commission’s—steady efforts to publicly outline and develop its analysis on the application of the federal securities laws to initial coin offerings (“ICOs”) and certain digital tokens. …
Artificial intelligence and machine learning (for simplicity, we refer to these concepts together as “AI”)[1] have been hot topics in the financial services industry in recent years as the industry wrestles with how to harness technological innovations.  In its report on Nonbank Financials, Fintech, and Innovation released on July 31st, the Treasury Department (“Treasury”) generally embraced AI and recommended facilitating the further development and incorporation of such technologies into the financial services industry to…
On July 31st, the Office of the Comptroller of the Currency (“OCC”) announced that it would begin accepting applications for a special purpose national bank charter (“FinTech Charter”) from nonbank financial technology companies that offer bank products and services, meet the OCC’s chartering requirements (the “FinTech Charter Policy Statement”) and adhere to the OCC’s supplemental Licensing Manual (the “Comptroller’s Manual Supplement” or the “Supplement”).  Hours earlier, the Treasury Department released its…
On July 31st, the Treasury Department (“Treasury”) released its fourth and final report in response to President Trump’s Executive Order 13772.  The report, entitled “A Financial System That Creates Economic Opportunities: Nonbank Financials, Fintech, and Innovation” (the “Report”), only briefly addresses distributed ledger technologies, blockchain and digital assets, but takes broad aim at perceived regulatory challenges to innovation.  The Report argues for a significant rethinking of state and federal regulation across data…
On Wednesday, July 25th, Pamela Marcogliese, a partner at Cleary Gottlieb,  moderated a panel for Women in Derivatives on the role of artificial intelligence (“AI”) and machine learning in the financial industry featuring experts such as Dr. Sherry Marcus, Managing Director and Co-Head of Data Science Core at BlackRock, Asita Anche, Managing Director, Head of Systematic Market Making, Risk Centralization & Data Science at Barclays, Kristina Fan, CEO & Founder at 7 Chord (a FinTech…
The New York Department of Financial Services (“NYDFS”) recently announced approval of significant new activities for FinTech-oriented businesses. Over the past week, NYDFS has granted the following approvals: Additional virtual currencies available for trading through Paxos Trust Company LLC (formerly known as itBit Trust Company), a NY-chartered trust company; and Approval of BitLicenses for Xapo, Inc. and Square, Inc. which would authorize them to offer custody and exchange services, respectively, for Bitcoin to residents of…
The New York Department of Financial Services (“NYDFS”) recently announced approval of significant new activities for FinTech-oriented businesses. Over the past week, NYDFS has granted the following approvals: Additional virtual currencies available for trading through Paxos Trust Company LLC (formerly known as itBit Trust Company), a NY-chartered trust company; and Approval of BitLicenses for Xapo, Inc. and Square, Inc. which would authorize them to offer custody and exchange services, respectively, for Bitcoin to residents of…
On Thursday, June 14th, the SEC Director of Corporation Finance, William Hinman, stated his view that current secondary market trades of Ether are not now securities transactions as part of a speech on the treatment of digital assets under the securities laws.  While he expressly set aside the question of whether the capital-raising that initially accompanied the sale of Ether in 2014 was a securities offering, he confirmed previous suggestions that Ether is a prime…