Below is a summary of some of the significant legal and regulatory actions that occurred over the past week. This alert is not intended to be a comprehensive list of all such developments, but rather a selection of publicly-reported news that may be of particular interest.
California and New York Take Divergent Approaches to Regulating Fintech
After the OCC began developing bank charters for fintech firms, California’s financial regulator sent a letter to 13 fintech companies seeking a “frank, constructive dialogue” on ways to improve on “the lack of consistency and certainty in the current state regulatory regime.” For more information, please visit our sister blog The Fintech Report.
CFPB Lives to Fight Another Day
By order dated February 16, the D.C. Court of Appeals granted the Consumer Financial Protection Bureau’s (“CFPB”) petition for a rehearing on the Court’s October 2016 decision in PHH Corp. v. CFPB. For more information, please visit our sister blog The Fintech Report.
A New AML Paradigm is Proposed
In a Clearing House Report published February 16, a consortium of stakeholders from both the financial service and law enforcement sectors propose an overhaul in the way financial firms are expected to assist in preventing and reporting criminal activity, including terrorist financing. The Report proposes shifting to a system where law enforcement and investigators relay their priorities, and financial firms report on those priorities rather than reporting every potentially suspicious transaction, as is the current practice. The recommendations are designed to both cut down on the extensive use of resources and reports which yield very limited benefit to law enforcement, and to simultaneously shift those resources to where they can most effectively prevent criminal activity.
Hawaii Legislature May Establish a Blockchain Working Group… In 21 Years.
On January 25, 2017, Representatives Mark Nakashima and Chris Lee introduced HB1481 in the House of Hawaii’s State Legislature. The bill seeks to establish a working group to study the uses of, and determine best practices regarding, blockchain technology. The working group would include stakeholders from not only financial services and legal industries, but also from industries such as identity management, healthcare, manufacturing, and tourism. The House first referred HB1481 to its committee on Economic Development & Business (“EDB”), and with minor revisions, the EDB committee passed HB1481 H.D.1 on February 14 and referred it to the House Finance committee. Those minor revisions? The EDB Committee set the effective date as July 1, 2038. (Track HB1481.)
North Dakota Legislature Hits Roadblock in Attempt to Study Virtual Currency
After unanimously passing in the Senate, North Dakota’s Senate Bill No. 2100 received a unanimous “do not pass” recommendation from the House committee for Industry, Business and Labor on February 14. The bill mandates that legislative management “consider the feasibility and desirability of regulating virtual currency, such as bitcoin,” during the 2017-18 interim, and “report its findings and recommendations, together with any legislation required to implement the recommendations,” to the next legislative assembly. Introduced at the request of North Dakota’s Department of Financial Services, it remains to be seen whether the House will vote in accordance with the State Senate or with the committee’s recommendation.
BTCChina Halts Bitcoin and Litecoin Withdrawals
Citing the need to upgrade inspection and verification systems to “aggressively guard against money laundering, illegal money exchange, pyramid schemes, and other illegal activity,” BTCChina announced suspension of bitcoin and litecoin withdrawals until March 15. BTCChina’s announcement comes about a week after similar announcements from China’s other two largest exchanges – OKCoin and Huboi. It is unclear if the People’s Bank of China (“PBOC”) directly ordered these exchanges to suspend withdrawals. However, the PBOC conducted “inspections” of several the Chinese exchanges in January, and issued a statement on February 9 via its website warning that exchanges violating anti-money laundering or foreign exchange regulations could be closed down in accordance with applicable law.