On May 2, 2019, a court in the Southern District of New York (“SDNY”) held that the Office of the Comptroller of the Currency (“OCC”) lacked the statutory authority to charter nondepository special purpose national banks (the so-called “FinTech Charter”).  In denying, with one exception, the OCC’s motions to dismiss claims by New York’s Department of Financial Services (“DFS”), the Court held that the OCC could not charter a nondepository “national bank” because the National…

On April 11, 2019, the French parliament adopted a law (the “Loi Pacte”or “Law”)[1] that establishes a new regulatory framework for initial coin offerings (“ICOs”) of blockchain based tokens by entities established or registered in France.  At the heart of the Law’s ICO provisions is an innovative framework that will allow issuers to request an optional visa from the French Financial Markets Authority (the “AMF”) prior to undertaking an ICO.  ICOs of tokens that…

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…

The United States offers an innovative and diverse marketplace along with a sound infrastructure for new cryptocurrency and digital asset businesses.  However, the U.S. regulatory framework for digital asset businesses creates significant barriers to innovation and risks frittering away the potential benefits of the U.S. markets’ creativity. One of the chief challenges for today’s cryptocurrency businesses, especially those offering exchange, trading, or custody services, is the fragmented and inconsistent state law framework currently applied to…

On March 12, the SEC’s Division of Investment Management (“Division”) published a letter from Paul G. Cellupica, Deputy Director and Chief Counsel of the Division, to Karen Barr, President and CEO of the Investment Advisor Association, laying out a number of issues under Rule 206(4)-2 (the “Custody Rule”).  The letter included a request for information on possible revisions to the Custody Rule under the Investment Advisers Act of 1940 focused on a series of open-ended…

On February 26, 2019, Steven Maijoor, the Chair of the European Securities and Markets Authority (ESMA), delivered a keynote speech to the 3rd Annual FinTech and Regulation conference in Brussels.  In his speech, he highlighted ESMA’s recent initiatives in the crypto-asset and distributed ledger technology (DLT) space and noted ongoing areas of focus.…

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] …