Weekly Update

TFU | March 12-18

The IRS and SEC upping the pressure on crypto investors; Gemini established a crypto SRO; Coinbase received an FCA e-money license; Google will ban crypto ads; Robinhood eyes a $5B valuation; and Circle launched its new crypto platform.

Leading Off

The IRS and SEC are increasing their scrutiny of cryptocurrency investors and investments; the Gemini group established an industry organization aimed at regulating crypto market participants; Coinbase received an e-money license from the U.K. FCA and partnered with Barclays; Google announced it will ban cryptocurrency-related ads; new funding for investment app Robinhood would reportedly give the firm a $5B valuation; and Circle launched its new crypto exchange platform.

In the News

The SEC has “dozens” of ICO investigations underway.  Stephanie Avakian, co-director of the Securities and Exchange Commission’s (SEC) Enforcement Division, said that the agency has numerous investigations pending related to cryptocurrencies and initial coin offerings (ICO). “We are very active, and I would just expect to see more and more,” Avakian said.

Congressional hearing tackles crypto.  The House Capital Markets, Securities and Investment Subcommittee met last week to discuss innovation in financial technology, particularly focusing  on cryptocurrency and related regulatory efforts. “Congress has a responsibility to ensure that investors are protected without unduly preventing growth,” noted Rep. Randy Hultgren (R-IL).

IRS heightens scrutiny of crypto investors.  The Internal Revenue Service (IRS) reportedly is increasing its focus on cryptocurrency investors who may be hiding income. While “the IRS hasn’t clarified important issues on digital currencies,” the agency’s new approach is exemplified by its recent court victory requiring crypto exchange Coinbase to turn over 13,000 user records.

Is regulatory pressure limiting the value of AI in AML?  AI tools can help reduce false-positives in AML screenings, but some banks worry about how regulators respond to fewer suspicious activity reports. “There is a culture where regulators . . . might say, if you’re a $10 billion bank, you should be filing 10,000 SARs a year like your peers,” said Micah Willbrand of NICE Actimize.

Gemini establishes SRO for crypto market participants.  The crypto exchange operated by Cameron and Tyler Winklevoss announced the creation of the Virtual Commodity Association, a self-regulating organization (SRO) aimed at “foster[ing] financially sound, responsible, and innovative virtual commodity markets through a system of industry sponsored standards.”

Coinbase gets U.K. e-money license, partners with Barclays.  The crypto exchange was granted an e-money license by the U.K. Financial Conduct Authority, allowing it to “provide payment services and issue e-money” throughout the EU. The firm also “established a ‘full banking relationship’” with Barclays to handle deposits and withdrawals for U.K. customers.

Google to ban cryptocurrency ads by June 2018.  Google updated its financial services ad policy to ban advertisements with cryptocurrency-related content, including initial coin offerings (ICOs), wallets, and trading advice. The decision follows a similar move by Facebook earlier this year.

Grab launches dedicated fintech unit.  The Asian ride-hailing firm’s Grab Financial will “encompass all of Grab’s fintech offerings,” including payments, loyalty, and financial services. Grab also announced a joint venture with Japan’s Credit Saison to provide “loans and lending services to unbanked and underbanked consumers and small businesses across Southeast Asia.”

Victory Park Capital and IFC establish fintech fund.  The venture capital firm and the World Bank’s International Finance Corporation (IFC) partnered to create an investment fund focused on making “growth investments in technology-driven companies across emerging markets with a focus on financial infrastructure, products and services.”

Robinhood looks to raise $350M.  The three-year-old stock-trading app is in talks to raise $350 million in new funding, which would value the firm at over $5 billion. With more than four million users, Robinhood has a “soaring popularity with millenials” and recently introduced no-free cryptocurrency trading.

Lightning Labs raises $2.5M.  The startup, which leverages the Lightning Network protocol to “boost the number and speed of transactions [on] the bitcoin blockchain without increasing the size of blocks,” raised $2.5 million in seed funding from investors including Square and Twitter co-founder Jack Dorsey,  Square’s Jacqueline Reses, and Robinhood co-founder Vlad Tenev.

Circle launches crypto investment platform.  Following its recent acquisition of the Poloniex crypto exchange, the Boston-based money transfer service launched Circle Invest, allowing users to buy and sell cryptocurrencies without any fee. The service currently supports Bitcoin, Bitcoin Cash, Ethereum, Ethereum Classic and Litecoin.






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