Dear Readers, There will not be a Fintech Update next week in celebration of the U.S. Thanksgiving holiday, but we will return on Monday, December 3. Have a great week ahead and a very happy Thanksgiving! Best, the Fintech Update Team
The SEC reached settlements with two firms that conducted unregistered ICOs; Bitcoin Cash split over concerns around proposed network changes; the NYDFS granted a new BitLicense to the New York Digital Investment Group; France intends to introduce new ICO rules early next year; Revolut hopes to raise $500 million to bankroll its expansion into the U.S. market; the head of the IMF encouraged central banks to consider adopting cryptocurrencies; and the Economist explores the impact of quantum computing on encryption and data security.
In the News
SEC settles two ICO suits… The U.S. Securities and Exchange Commission (SEC) settled two lawsuits against Paragon Coin Inc. and CarrierEQ Inc. for conducting unregistered initial coin offerings (ICO) last year. The firms “each agreed to pay $250,000 in civil penalties and to notify investors they are eligible for refunds.” Paragon’s ICO brought in 8,300 investors, while CarrierEQ sold to 2,500 investors.
…and probes $50M crypto sale. The SEC also is investigating a $50 million cryptocurrency sale by Salt Lending Holdings. The company is affiliated with Erik Vorhees, CEO of ShapeShift AG, which is currently under investigation for allegedly facilitating criminal money laundering. The SEC is looking at whether Salt’s token sale should have been registered, and at Mr. Vorhees’ role in the fundraising.
Bitcoin Cash forks in two. The cryptocurrency, itself an offshoot of the original Bitcoin blockchain, has split itself in two, creating “Bitcoin ABC” and “Bitcoin SV” (SV is short for “Satoshi’s Vision”). The dispute leading to the fork concerned proposed changes to the network, including “reordering transactions to increase block capacity” and new code “to support greater interoperability.”
NYDFS grants newest BitLicense to NYDIG. The New York Department of Financial Services (NYDFS) issued a BitLicense, which allows companies to offer crypto-related services in NY, to the New York Digital Investment Group (“NYDIG”). NYDIG can now offer custody services for cryptocurrencies. This is the 14th BitLicense granted by the NYDFS since it created the program in 2015.
IMF tells central banks to consider digital currencies. IMF head Christine Lagarde said central banks should consider issuing digital currencies to “fill the void left by the decline of cash”, helping financial inclusion and avoiding a concentration of power in a few payment providers. Some central banks are already exploring the idea, while others fear it could pose risks to financial stability.
Prosper begins offering HELOCs. The online lender announced it will diversify its product offerings, adding home equity lines of credit (HELOC) in addition to its traditional personal loans. New CEO David Kimball is putting a “big bet on [HELOCs], which the company believes will be in high demand over the next few years” as it works to keep pace with competitors like SoFi and LendingClub.
DeepMind and Google spark privacy fears over health data. The U.K. AI firm announced the transfer of its health data subsidiary to parent-company Google, creating concerns for patients’ privacy. The arrangement between DeepMind’s health unit and U.K. hospitals to process the medical data of 1.6 million patients has previously been the subject of an investigation by the U.K. privacy regulator.
France to introduce ICO rules. France plans to introduce new rules regulating initial coin offerings (ICOs), which would make it one of the first large countries to do so. France’s proposed approach would reportedly permit the issuance of tokens to investors, but would require all participants to abide by traditional rules like KYC.
MAS may create “express” regulatory sandbox. The Monetary Authority of Singapore (MAS) is considering building a “Sandbox Express,” which would alleviate “low risk solutions of the cumbersome application and approval process demanded under its existing approach.” MAS plans to make several sandboxes specific to different business types, with express approval decisions granted within 21 days.
Revolut to raise $500M for U.S. expansion. The U.K. challenger bank is in talks to raise $500 million in Series D funding to bankroll its expansion into the U.S. market. City A.M. reports that the round is due to close in early 2019, with Japan’s Softbank among investors. Revolut’s U.S. launch has already been delayed several times due to regulatory issues.
Nvidia hit by tumultuous crypto market. The chip maker projected a decline in revenue for the quarter, partly due to holding excess inventory that it had expected to sell to cryptocurrency miners. Demand for graphics chips had surged as a result of their utility in crypto mining “rigs,” which have massive computational requirements, but demand has slowed with the decline in global crypto prices.
The Economist profiles quantum computing’s impact on encryption. According to the Economist, by the 2030s quantum computing will be advanced enough to make all traditional encryption obsolete, posing a security threat to data encrypted with current technology. The article also highlights the difficulty of developing and implementing standards for such quantum computing technologies.