TFU | April 16-22

Leading Off

A group of leading VC firms is lobbying the SEC for a safe harbor from securities laws for some crypto tokens; digital banks are supporting changes to the CRA to better reflect their expansive geographic footprint; Zelle has become a favorite tool for fraudsters; the SEC subpoenaed Riot Blockchain; Facebook launched new personal data permissions settings for European users; and the EU will increase its regulation of cryptocurrencies through changes to its AML rules.

In the News

VCs lobby SEC for cryptocurrency safe harbor. A group of venture capital firms, led by Andreessen Horowitz and Union Square Ventures, lobbied the Securities and Exchange Commission (SEC) for a safe harbor exemption for certain crypto tokens. The group said that some cryptocurrencies are “so decentralized [they] should not be deemed [securities].”

New York AG ups pressure on crypto exchanges.  The State Attorney General’s office sent a questionnaire to 13 crypto exchanges [full text], including Gemini Trust and Coinbase, requesting information about their “trading rules, fee structures, policies, and safeguards to prevent conflicts of interest and fraud, [and] protection of customer assets.

Online-only banks welcome changes to CRA.  Digital banks, which often lack strong ties to certain geographic areas, have favored proposals to reform the Community Reinvestment Act (CRA) that would decrease its emphasis on the location of a bank’s headquarters and instead offer credit for investments made in communities anywhere such banks conduct business.

TransferWise joins BoE payment system.  The London-based global payments service became the first non-bank to join the Bank of England’s (BoE) ‘Real Time Gross Settlement’ (RTGS) system.’ Joining the BoE’s RTGS system will allow TransferWise “to process payments into the UK without going through a commercial bank.”

Zelle has become a target for hackers and fraudsters.  The New York Times expands on an issue we highlighted in February:  The big bank-backed money-transfer service has become “irresistible to thieves” due to its porous fraud detection controls. Criminals have been able to use Zelle “to steal from victims . . . some of whom had never used Zelle.”

SEC subpoenas Riot Blockchain. The Securities and Exchange Commission (SEC) issued a subpoena to Riot Blockchain requesting “certain information about the company.” Riot made news when its stock jumped 500% after changing its name amid a Bitcoin-buying frenzy in the second half of 2017.

JPMC tests blockchain platform for debt issuance. JPMorgan Chase (JPMC) teamed up with the National Bank of Canada to test its Quorum blockchain platform for debt issuance. The pilot was designed to assess Quorum’s ability to “streamline origination, settlement, interest rate payments and other processes,” as the bank considers a move to sell or spin off Quorum.

Kraken ends Japanese operations.  The San Francisco-based crypto exchange will no longer provide services to Japan-based customers after almost four years in the market. Kraken said its decision was due to the “rising costs of doing business in Japan,” and that ceasing Japanese operations would allow it to “better focus . . . resources to improve in other geographical areas.”

Facebook rolls out new privacy prompts for EU users.  The social media giant will begin “asking European users for permission to use their personal data” for a variety of features like facial recognition and targeted advertising, following the Cambridge Analytica scandal and as it prepares for compliance with the forthcoming EU General Data Protection Regulation (GDPR).

EU Parliament votes to regulate cryptocurrencies.  The EU legislature voted to change its AML Directive to include language ending the anonymous use of cryptocurrencies.

ICOs persist, despite regulatory crackdowns.  The Wall Street Journal highlights that many startups are “barreling into uncharted territory” by pursuing initial coin offerings (ICOs) in a stricter regulatory environment than in the past. The WSJ notes that “some crypto firms strictly adhere to U.S. legal guidelines . . . [while others go] overseas out of the reach of U.S. regulators.”

Goldman Sachs buys Clarity Money.  The bank purchased the two-year-old personal finance app for an undisclosed amount “in the high eight figures.” Clarity “uses algorithms and [AI] to help consumers [with] bills, find a better credit card, and set savings goals,” and supplements Goldman’s recent moves into consumer financial services.

Michael Novogratz, and betting on Bitcoin.  The New Yorker profiles the “on-again, off-again billionaire” and former hedge fund executive, who has become one of America’s biggest cryptocurrency investors. Novogratz recently launched Galaxy Investment Partners, a merchant bank focused on cryptocurrencies and blockchain-based ventures.

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