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.
Uniform Law Commission on Virtual Currency
The drafting committee for the Uniform Law Commission met March 3-5 to discuss the latest draft of its Uniform Regulation of Virtual Currency Business Act (“VCBA”). As highlighted by the official comments of policy groups like Coin Center and industry participants like Coinbase, an ongoing point of contention is that the existing draft of the VCBA does not include a clear exemption from dual licensing requirements for businesses already licensed for money transmission activity. The draft VCBA also does not explicitly permit one for one, like-kind holding of virtual currency as permissible investments to meet virtual currency obligations. Follow the Uniform Law Commission’s developments here.
Legislative Hot Takes
A handful of states have seen legislative progress which could impact money transmission or blockchain activity.
- New Hampshire HB 436, which passed house vote on March 8, seeks to modify the existing definition of money transmission to include virtual currency business activity, and then simultaneously exempt persons conducting money transmission business activity from needing a money transmission license in New Hampshire.
- Florida HB 1379, introduced on March 7 and referred to several committees on March 10, would amend Florida’s Money Laundering Act to include a definition of virtual currency as “a medium of exchange in electronic or digital format that is not a coin or currency of the United States or any other country.”
- Maine LD 950, introduced on March 9, proposes to establish a “Study Using Blockchain Technology in Conjunction with Paper Ballots in Maine Elections.”
- Texas SB1403, introduced on March 7, would increase the surety bond requirement from $300,000 to $500,000 for money services business licensed in Texas who operate via the internet.
We will continue to monitor the progress of these matters as they progress through state legislatures.
Class Action to Proceed in Fair Debt Collection Practices Suit Against Midland
The U.S. District Court for the Southern District of New York is permitting a class action lawsuit to proceed involving allegations that Midland Funding, LLC (Midland) violated state usury laws in its debt collection practices. Midland had claimed that, since the original debt agreement contained Delaware choice-of-law provisions, and since the debtor had defaulted on the obligations, New York’s criminal usury interest rate cap of 25% should not apply to Midland’s collection of the debt – notwithstanding that the debtor lived in New York. In certifying two classes of plaintiffs which could cover as many as 50,000 residents of New York, the U.S. District Court disagreed with Midland and concluded that the court should apply New York law pursuant to New York’s common law choice of law rule and that the New York criminal usury cap of 25% applies to defaulted obligations. A scheduling conference regarding further proceedings took place on March 8, and the Opinion and Order can be found here.
Can’t Use a Blockchain to Escape Securities Laws in Canada
The Ontario Securities Commission (OSC) has issued public comments indicating that businesses using distributed ledger technology (DLT) to facilitate the issuance of equity, debt, or other securities offerings should consider whether the activities trigger obligations to register or file a prospectus with the OSC. The comments came from Pat Chaukos, Chief of the OSC LaunchPad, which is a team of securities regulators dedicated to providing support to innovative FinTech businesses who are navigating regulatory requirements. The OSC LaunchPad invites businesses to contact the OSC LaunchPad with questions on how DLT activity may fall within the scope of securities laws.
Australian Government Launches Fintel Alliance
The Australian Transaction Reports and Analysis Centre (AUSTRAC) hosted the launch of a Fintel Alliance on March 3, which was formally launched by the Minister for Justice, the Hon. Michael Keenan MP. AUSTRAC is the Australian agency which regulates financial services industries to combat money laundering, organized crime, tax evasion, and terrorism. The new Fintel Alliance seeks to bring together members across industries and agencies to: (1) help private sector partners more easily identify and report suspicious transactions, (2) help law enforcement agencies more quickly arrest and prosecute criminals, and (3) work with academia to build knowledge and gather insight. The UK’s National Crime Agency has joined the Fintel Alliance, and the initial joint operational projects of the group include an examination of the Panama Papers, exploitation of the Australian Cyber Online Reporting Network (ACORN) data, and identification of money mules.
For a comprehensive list of developments please see our Virtual Currencies: International Actions and Regulations.