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.
IRS Tailors Request for Coinbase Transactions
After launching an investigation of Coinbase customer accounts, the IRS filed a Notice in California District Court on July 6, limiting the scope of the investigation to only the accounts that issued transactions of $20,000 or more during in 2013 to 2015. The investigation was initially motivated by the suspected underreporting of bitcoin gains. Only 802 people reported bitcoin gains to the IRS for the 2015 year, despite bitcoin’s steep price increase from $13 to $1,100 over the years under review. Members of Congress had criticized the IRS’s original scope as overly burdensome and invasive, particularly for the thousands of “hobby” customers with nominal bitcoin holdings. IRS filing
CFTC Appoints New LabCFTC Director and Chief Innovation Officer
On July 10, the CFTC announced the appointment of Daniel Gorfine as LabCFTC Director and Chief Innovation Officer. LabCFTC was launched in May 2017 as an initiative to promote responsible fintech innovation and serve as an information source for Commissioners to aid policy development. Gorfine has experience in fintech serving as director of financial markets policy and legal counsel at the Milken Institute think tank. In his new role, Gorfine will work closely with U.S. and international regulatory bodies to coordinate the implementation of regulatory systems and procedures. CFTC Press Release
Illinois Moves Towards Recognizing Digital Currencies
Leaders in the fintech industry have praised Illinois in its steps towards embracing blockchain technologies including digital currency. Last month, the state created the Illinois Legislative Blockchain and Distributed Ledger Task Force as a body tasked with informing the State Legislature of blockchain’s potential for governmental recordkeeping. The Illinois Department of Financial and Professional Regulation issued guidelines in June about digital currency which will provide clarity for money service businesses. Compared to other states, including New York, Illinois has recognized the importance of anonymity of cryptocurrency transactions and has embraced digital currency as a method of transacting money, acting more like cash in both anonymity and fluidity. Illinois Digital Currency Regulatory Guidance
Mark Karpeles Pleads Not Guilty
Former Mt. Gox chief executive Mark Karpeles emphatically maintained his innocence this week in a Tokyo District Court on July 11, pleading not guilty to charges of embezzlement and data manipulation. The charges related to the exchange’s loss in 2014 of 850,000 bitcoins and $28 million in cash.
EU Banking Regulations Taking Effect in 2018
Despite improving privacy protections, the General Data Protection Regulation has been criticized by banking officials as onerous and potentially problematic. The confidentiality law, which will become enforceable May 25, 2018, will replace the current Data Protection Directive and will impose stricter guidelines for banks in how they manage and protective customer data. The fintech industry recognizes the need for enhanced security measures and has noted the opportunity for fintech startup companies to work with banks to ensure compliance with the GDPR’s security standards. GDPR Changes
Swiss FinTech Law Takes Effect
On July 5, Switzerland’s Federal Council adopted a revision to the country’s Banking Ordinance, which will swiftly take effect on August 1. The amendment simplifies certain regulations for both fintech firms and established financial service providers by reducing barriers to market entry for newer fintech companies and existing companies launching pilot programs for new financial services. Specifically, companies will not be required to obtain authorization to operate on a commercial basis for accepting of funds up to 1 million Swiss francs (roughly $1.04 USD). Swiss Federal Council
For a comprehensive list of developments please see our Virtual Currencies: International Actions and Regulations.