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The CFTC’s LabCFTC recently released “A Primer on Smart Contracts” as part of LabCFTC’s initiative to engage with stakeholders on FinTech topics. The primer explains smart contracts, and explores their potential benefits — with a particular focus on the financial sector — and challenges. The CFTC has an interest in smart contracts because,…

Blockchain technology has the potential to revolutionise many industries; it has been said that “blockchain will do to the financial system what the internet did to media”.  Its most famous use is its role as the architecture of the cryptocurrency Bitcoin, however it has many other potential uses in the financial sector, for instance in trading, clearing and settlement, as well as various middle- and back-office functions.  Its transformative capability also extends far beyond the financial sector, including in smart contracts and the storage of health records to name just a few.

A blockchain is a shared immutable digital ledger that records transactions / documents / information in a block which is then added to a chain of other blocks on a de-centralised network.  Blockchain technology operates through a peer network, where transactions must be verified by participants before they can be added to the chain.

Notwithstanding its tremendous capabilities, in order for the technology to unfold its full potential there needs to be careful consideration as to how the technology can comply with new European privacy legislation, namely the General Data Protection Regulation (the “GDPR”) which came into force on 25 May 2018.  This article explores some of the possible or “perceived” challenges blockchain technology faces when it comes to compliance with the GDPR.…

Continue Reading The GDPR and Blockchain

On July 16, 2018, the Financial Stability Board (“FSB”) issued a report to the G20 Ministers of Finance and Central Bank Governors summarizing the work that the FSB and other international standard-setting bodies have undertaken regarding crypto-assets.  The FSB notably reported that it has developed a framework for monitoring financial stability risks related to crypto-assets, including proposed metrics based largely on public sources.  The FSB also acknowledged that crypto-assets and crypto-asset platforms do not pose a material risk to global financial stability at this time.
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Continue Reading FSB Develops Framework for Monitoring Crypto Risks

This past week has been an especially active one for the U.S. Commodity Futures Trading Commission (CFTC). On Monday, in a speech to the North American Securities Administrators Association (NASAA), CFTC Chairman Giancarlo announced a Memorandum of Understanding (MOU) to increase cooperation between state securities regulators and the CFTC — particularly with respect to prosecuting potential fraud and market abuse as it pertains to virtual currencies. The CFTC Chairman also previewed a staff advisory relating to Virtual Currency Derivative Product Listings, which was released later that same day. Wrapping up the week, the press reported that the Department of Justice, in cooperation with the CFTC, has opened a criminal investigation into whether traders are manipulating the price of Bitcoin and other virtual currencies. …
Continue Reading The CFTC’s Active Week: Virtual Currencies in Focus

California has taken a conservative step on the path to greater regulation of blockchain technology or legal recognition of blockchain-secured data.  On May 18, an amended bill was referred to the State Assembly Appropriations Committee for review that would provide for the establishment of a blockchain working group to evaluate “the potential uses, risks, and…

The Australian Transaction Reports and Analysis Center (“AUSTRAC”) recently implemented a new regulation for digital currency exchange providers operating in Australia called the Anti-Money Laundering and Counter-Terrorism Financing (Digital Currency Exchange Register) Policy Principles 2018.  AUSTRAC is Australia’s financial intelligence agency and is responsible for the enforcement of Australia’s Anti-Money Laundering and Counter-Terrorism Financing…

On March 22, 2018, the Government Accountability Office (“GAO”) issued a report on the regulation of financial technology (“fintech”) in response to a request from Congress for more information on “fintech activities.” The report concludes that agencies that regulate fintech firms should coordinate with each other more closely, develop offices of innovation (for agencies that have no already done so), and consider adopting approaches to fintech used in foreign jurisdictions, such as the “regulatory sandbox” approach used by the U.K.’s Financial Conduct Authority. GAO also reports on a few innovation initiatives under consideration by agencies such as the OCC and CFTC.

The GAO’s analysis focuses on the following fintech areas: payments, lending, wealth management and financial advice, and blockchain/distributed ledger technology, including virtual currency.  The report is the product of interviews with over 100 fintech stakeholders, including representatives of fintech firms, financial institutions, trade associations, law firms, consumer groups, and federal and state financial regulators.…

Continue Reading GAO Publishes Report on Fintech Regulation

Blockchain is a powerful innovation that is poised to bring substantial positive change to the financial services industry as well as many other industries.  Despite such promise, blockchain, like any emerging financial services technology, must be evaluated from the perspective of cybersecurity risk – both to an individual financial institution and to the broader and…

Yesterday, the Federal Communications Commission sent a letter to an individual in Brooklyn, New York, alleging that a device in the individual’s residence that is being used to mine Bitcoin is generating spurious radiofrequency emissions, causing interference to a portion of T-Mobile’s mobile telephone and broadband network.

The letter states that on November 30, 2017,…