TFU | July 30 – Aug 5

Leading Off

The U.S. OCC formally announced that it will begin accepting special-purpose national bank charter applications from fintech firms engaged in the business of banking; the U.S. Treasury released a 200-page report on fintech, recommending dozens of changes and actions to support financial innovation; a WSJ report revealed massive manipulation of cryptocurrency markets due to abundant “pump and dump” schemes; IBM is working with FX settlement service CLS on a blockchain “app store”; and TechCrunch profiled the “dramatic rise and fall” of P2P lending in China.

In the News

The OCC will accept bank charter applications from fintechs.  The U.S. Office of the Comptroller of the Currency (OCC) formally announced that it will “begin accepting applications for national bank charters from [fintech] companies” [press release]. The OCC’s “fintech charter” has been a subject of debate since former Comptroller Thomas Curry first discussed it late 2016.

U.S. Treasury releases wide-ranging fintech report.  The Treasury Department produced a report on the status and regulation of “non-bank financials, fintech, and innovation” in America [full text]. The report includes dozens of recommendations, including for the U.S. to “streamline” fintech regulation, extend national bank charters to fintech firms, and employ regulatory sandboxes in financial services.

The SEC is reviewing brokers’ crypto deals.  According to a Bloomberg report, the Securities and Exchange Commission (SEC) has questioned several brokerages about fees generated from activities related to cryptocurrency trades and financings, and initial coin offerings (ICOs). The SEC has been active in its enforcement of securities rules with regard to crypto activities, particularly ICOs.

WSJ finds more evidence of crypto market manipulation.  An analysis by the Wall Street Journal revealed that “dozens of trading groups are manipulating the price of cryptocurrencies . . . [causing] hundreds of millions in losses for those caught on the wrong side.” The analysis found 175 “pump and dump” schemes involving over 100 different cryptocurrencies in the first seven months of 2018 alone.

dYdX to launch crypto derivatives protocol.  After recently landing $2 million in seed funding, the startup will roll out a service allowing investors to take “short and leverage positions” on several cryptocurrencies. “[Derivatives are] usually an order of magnitude bigger than the spot trading or buy/sell market. […] I think there’s a really big opportunity there,” said dYdX founder Antonio Juliano.

Chase partners with Samsung on mobile payments.  The global bank struck a deal with the South Korean tech giant to allow Chase customers to piggyback on Samsung Pay’s payments technology at point-of-sale terminals. Consumers that link Chase Pay to Samsung Pay will also “be able to earn both Samsung Rewards points and [in some cases] Chase Ultimate Rewards points” for their purchases.

Nordea boosts automation, cuts costs.  The Scandinavian bank reduced staff by 8% and total costs by 11% in Q2, while increasing operating profits by 31% compared to 2017, as it works to implement AI and robots in areas from asset management to customer services. CEO Casper von Koskull has predicted that banks will reduce their current human workforce by 50% in the next decade.

IBM and CLS partner on blockchain “app store.”  The tech giant is working with the FX settlement firm and a consortium of nine banks to build “a shared marketplace platform . . . for multiple blockchain applications.” The LedgerConnect platform aims to “enable [financial services firms] and software vendors to deploy, share and consume services hosted on a single distributed ledger network.”

Senator’s paper provides insights into tech regulation priorities.  Senate Intelligence Committee Vice Chairman Mark Warner’s (D-VA) paper outlines options for the regulation of large technology firms and ideas of how to combat disinformation, protect privacy, and promote competition. The paper suggests creating a GDPR-like privacy law and new rules for “essential” technology services.

Ant Financial is drawing attention from big banks and the government.  Chinese regulators are considering designating the company, which completed more than $8 billion transactions last year, as a financial holding company, subjecting it to traditional capital requirements. China has faced mounting pressure to better manage and regulate its fintech giants.

On the collapse of P2P lending in China.  TechCrunch examines the “dramatic rise and fall of P2P lending in China.” Once seen as a rapidly expanding market with significant upside, “rapid growth since 2007 without significant regulation” has led to “soaring” default rates on P2P loans. China now has hundreds of troubled firms struggling to pay investors or under criminal investigation.

*Special Note/Shameless Self-Promotion: TFU Managing Editor Joe Oehmke was quoted in a recent AltFi article about the market opportunity for European digital banks entering the United States.

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