FinTech Update

Financial Services News for FinTech Companies and Lawyers

Every month is probably a busy month for the Governor of the Bank of England, Mark Carney, but September and October seemed especially so. The quiet Remainer was asked in September by the Chancellor, Philip Hammond, to extend his tenure for a further seven months, which Mr Carney responded positively to. From Mr Hammond’s perspective, it is one way of ensuring some form of stability somewhere. Mr Carney has so far managed to hold back…
On November 28, 2018, the United States District Court for the Southern District of California denied the U.S. Securities and Exchange Commission’s (SEC) request for a preliminary injunction against Defendants Blockvest, LLC (Blockvest) and Blockvest’s founder and chairman Reginald Buddy Ringgold, III (Ringgold). Securities and Exchange Commission v. Blockvest, LLC, et al.[1] The SEC alleged that Blockvest and Ringgold were offering and selling unregistered securities in the form of digital assets called BLV tokens.…
On Friday, November 16, 2018, the U.S. Securities and Exchange Commission (SEC) announced that it settled two cases against digital token issuers. The settlements, one with CarrierEQ Inc. (AirFox) and the other with Paragon Coin Inc. (Paragon), are the first time that the SEC has imposed civil penalties on companies solely for offering digital tokens in an initial coin offering (ICO) that allegedly violates the securities laws. In addition to agreeing to pay civil fines…
On November 8, 2018, the U.S. Securities and Exchange Commission (the “SEC”) settled its first case against an unregistered cryptocurrency exchange.  Zachary Coburn, founder of EtherDelta, agreed to pay $313,000 in disgorgement and interest, along with a civil fine of $75,000, in order to settle SEC allegations that EtherDelta was acting as an unregistered securities exchange.…
Last month (September 2018), the House of Commons Treasury Committee issued a report on its inquiry into the regulation of crypto-assets. The inquiry examined, amongst other subjects, the role of digital currencies in the UK; the impact of distributed ledger (blockchain) technology; and how these should be regulated. The report recommends improvements to consumer and anti-money laundering protections (AML) when dealing in crypto-assets. The improvement will be achieved in part by extending the Financial Services…
Unlike in most other European jurisdictions the regulatory practice in Germany has been to treat Bitcoins as units of account and as such financial instruments pursuant to Section 1 German Banking Act (Kreditwesengesetz, “KWG”). The practical consequence of this is that most commercial services surrounding Bitcoins and other cryptocurrencies (including trading, brokerage, operating exchanges, investment advisory etc.) will be regulated activities, requiring the relevant authorisation (licence) of the Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht,…
In September of this year, certain congressmen expressed their intention to preempt state regulation of virtual currency regulation.  Rep. Darren Soto (D-Fla.) expressed a need for “partial federal preemption” of state laws and Rep. Warren Davidson (R-Ohio) plans to introduce a bill that may seek federal preemption of state licensing and oversight requirements of virtual currency exchanges. We have seen state push-back on attempts by the federal government to regulate parts of the FinTech space,…
In March of this year, the NFA issued a notice reminded futures commission merchants (“FCM”), introducing brokers (“IB”), commodity pool operators (“CPO”) and commodity trading advisors (“CTA”) that trade in, solicit or accept orders in virtual currency products (spot and derivatives) of their ongoing obligation to notify the NFA of such activities by amending the annual questionnaire (please see Reed Smith client alert here).  More recently, the NFA issued an August 2018 Interpretive Notice…
Most companies considering an Initial Coin Offering to U.S. purchasers have resigned themselves to the fact that their proposed token or coin offering is likely to be considered an offering of securities by the Securities and Exchange Commission (“SEC”) and must be made in compliance with U.S. securities laws. The logical next question then becomes – “what are my options?” Traditional IPO A traditional initial public offering (“IPO”) of equity securities usually requires extensive meetings…
Click here to see a demonstration of a simplified “AI and the Law: Data Contract”: https://lnkd.in/gRNDBk2  and the Companion Software Application.  This demo shows how we can access contract information stored as fields of data on the Microsoft Azure cloud.  (I use a credit agreement as an example, but the same principles work for any contract.)  With the increased focus on digitization of contracts in financial services, healthcare, shipping, energy, entertainment, and other industries, efforts…