Weekly Focus

  • CFTC approves LedgerX to clear fully-collateralized futures and options.
  • Square launches the Cryptocurrency Open Patent Alliance to spur cryptocurrency adoption and protect against trolls.
  • Mastercard launches testing platform for central bank digital currencies.
  • California’s Consumer Financial Regulator to get a new name and new powers.
  • Blockpit and CryptoTax complete merger.

U.S. Developments

CFTC Approves LedgerX to Clear Fully-Collateralized Futures and Options

The Commodity Futures Trading Commission (CFTC) announced that it has approved LedgerX, LLC’s amended order of registration to clear additional products, subject to certain conditions, as a derivatives clearing organization under the Commodity Exchange Act.

Under the order, the CFTC authorizes LedgerX to provide clearing services for fully-collateralized futures and options on futures in addition to the previously authorized swaps. This order supplements LedgerX’s designation as a contract market and swap execution facility.

Square Launches the Cryptocurrency Open Patent Alliance

Square launched the Cryptocurrency Open Patent Alliance (COPA), a non-profit, that will focus on keeping patents from becoming barriers to innovation. According to Square, it believes that there “is growing concern that ‘patent lockup’ could stifle innovation and adoption” amongst all cryptocurrencies.

COPA launches as an industry-wide invitation to the patent equivalent of an open-source community and will take a two-pronged approach with its community: (1) members pledge that they will never assert their patents on foundational cryptocurrency technology, except defensively, and (2) members create a shared patent library that lets each member use other member’s patents as needed defensively, giving even small companies a shield with which to protect themselves against patent aggressors.

As a good faith gesture, Square took the first move and opened all of its crypto patents for future COPA members to use.

Mastercard Launches Testing Platform for CBDCs

Mastercard announced its new testing platform for central bank digital currencies (CBDCs) that enables central banks, commercial banks, and advisory firms to assess and explore use cases for national digital currencies. According to a survey published by Bank for International Settlements in January 2020, 80% of central banks surveyed are engaging in some form of CBDC work and 40% have progressed to the experimentation phase.

Mastercard’s testing platform enables the simulation of issuance, distribution and exchange of CBDCs between banks, financial service providers, and consumers. As noted by Raj Dhamodharan, Executive VP of Digital Asset and Blockchain Products and Partnerships at Mastercard, “Mastercard is driving innovation with the public sector, banks, fintechs, and advisory firms in the exploration of CBDCs” and the “new platform supports central banks as they make decisions now and in the future about the path forward for local and regional economies.”

California’s Consumer Financial Regulator to Get a New Name and New Powers

If the Governor of California does not veto the bill, the new year will find that the California Department of Business Oversight (DBO) is getting a new name and new authorities after the passage of Assembly Bill 1864. The DBO will be renamed the Department of Financial Protection and Innovation (DFPI), and the agency will have the authority to enforce all consumer financial products or services laws. The bill enacts the California Consumer Financial Protection Law (CCFPL) to expand the agency’s oversight powers to new industry players through future regulations and empowers the agency to enforce against abusive acts or practices in addition to unlawful, unfair, or deceptive acts or practices. The DFPI will be empowered to create future registration requirements for a broader swath of consumer financial industry players, including entities that act as consumer reporting agencies, debt collectors, and to entities that the DFPI considers engaged in activities that attempt to evade consumer financial laws or are engaged in activities that are permissible for a bank to offer and will likely have a material impact on consumers. Presumably, future registration requirements could apply to credit reporting agencies or to buy-now pay-later companies. There are notable exemptions in the CCFPL, including escrow agents, finance lenders or brokers, and check sellers and bill payers.

International Developments

Blockpit and CryptoTax Complete Merger

Austria-based Blockpit has completed a merger with its German competitor, CryptoTax. As noted by Klaus Himmer, co-founder of CryptoTax, the “medium-term goal is to combine both companies to a renowned global player [in tax reporting] as well as an intensive expansion into the U.S. market.”

This merger comes on the heels of the U.S. Internal Revenue Service memorandum on the taxation of cryptocurrency received in the crowdsourcing labor market that concludes that “a taxpayer who receives convertible virtual currency in exchange for performing a microtask through a crowdsourcing platform has received consideration in exchange for performing a service, and the convertible virtual currency received is taxable as ordinary income.”