On October 11, 2019, the leaders of the Commodity Futures Trading Commission, Financial Crimes Enforcement Network, and Securities and Exchange Commission issued a joint statement to remind businesses that engage in digital asset activities of their anti-money laundering (“AML”) and countering the financing of terrorism (“CFT”) obligations under the Bank Secrecy Act (“BSA”).

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In May 2019, the UK Jurisdiction Taskforce (the “UKJT”) of the LawTech Delivery Panel published its public consultation paper on the status of cryptoassets and distributed ledger technology, as well as the enforceability of smart contracts, under English private law. While much of the literature around cryptoassets in the legal context has been centred on their regulation, the UKJT’s consultation paper focuses on the legal characterization of these instruments themselves. In this article, we consider how cryptoassets can be defined using the existing vocabulary of English private law and the implications of this characterization.
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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 many of those businesses. 
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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 questions on the intersection between digital assets and the Custody Rule.
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On January 22, the Financial Industry Regulatory Authority (“FINRA”)[1] released its 2019 Risk Monitoring and Examination Priorities Letter (the “Letter”).  The Letter highlights material new priorities for FINRA examinations in the coming year, as well as priorities in areas of ongoing concern.  The topics highlighted in this year’s Letter reflect FINRA’s increasing focus on its members’ interaction with, and adoption of, innovative financial technologies, as well as its implicit acknowledgement of the ability for such innovations to assist in regulatory compliance.  The new priorities highlighted in the Letter include several related to FinTech, including online distribution platforms, use of regulatory technology (or “RegTech”), and supervision of digital asset businesses.  In priority areas of ongoing concern, the Letter confirmed that FINRA will continue to focus on reviewing the adequacy of firms’ cybersecurity programs.  Below we detail FINRA’s discussion of these priorities and analyze them in the context of other recent guidance and enforcement actions.
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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.  These efforts have combined a series of enforcement proceedings with public statements by Chairman Jay Clayton and staff, including a more detailed statement of the SEC’s analytical approach in Corp. Fin. Director William Hinman’s speech on digital assets in June 2018.
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On September 11, the Securities and Exchange Commission (“SEC”) and the Financial Industry Regulatory Authority (“FINRA”) each separately initiated their first enforcement action for violations of broker-dealer regulatory requirements under U.S. securities laws in digital asset markets. These actions echo all prior agency actions and alerts indicating that where a “security” is involved, both agencies will expect digital asset market participants to fully comply with U.S. securities laws. Additionally, they serve as a serious reminder to all persons acting as “brokers”[1] or “dealers”[2] (together, “broker-dealers”) that just because digital asset securities are unconventional securities with unconventional compliance challenges does not mean that either the SEC or FINRA will lower its compliance expectations.
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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 realize the potential the technologies can provide for financial services and the broader economy.

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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 access, licensing, payments and many other issues.
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Today, Treasury released its long-awaited FinTech report entitled “A Financial System That Creates Economic Opportunities: Nonbank Financials, Fintech, and Innovation”. While the report provided only a very truncated discussion of distributed ledger technologies, blockchain, and digital assets, it discussed at length other key innovation and technology issues that are impacting the market for financial services. While DLT and digital assets appropriately garner many headlines, the innovative potential of new technologies for how financial services are accessed, delivered, bundled, analyzed, marketed, and regulated offers great opportunities as well as risks. The focus of the Treasury FinTech report on these fundamental issues no doubt will spur even more examination of our changing financial environment.
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