TFU | Nov. 19 – Dec. 2

Leading Off

The U.S. SEC settled with DJ Khaled and Floyd Mayweather for promoting ICOs without properly disclosing their endorsement deals; CLS launched its blockchain-based CLSNet payments netting service; the ECB launched its TIPS platform to allow near-instantaneous settlement of eurozone payments; Marriott disclosed a data breach affecting up to 500 million customers; Monzo is seeking to raise £20M through a new crowdfunding campaign; and SEC Chair Jay Clayton commented on the possibility of an approved crypto ETF.


In the News

SEC settles two celebrity ICO suits.  The U.S. Securities and Exchange Commission (SEC) fined music producer DJ Khaled and boxer Floyd Mayweather for promoting initial coin offerings (ICOs) without disclosing that they were paid endorsers. Mayweather had received $100,000 from Centra Tech, and $200,000 from Stox and Hubii Network, while Khaled was paid $50,000 from Centra Tech.

CLS and IBM launch blockchain-based payments netting service.  The global payments and settlement utility firm went live with CLSNet after two years of development with IBM. Goldman Sachs and Morgan Stanley are the first companies on the platform, although CLS has commitments from six other participants to join. CLSNet is the third IBM-backed blockchain consortium to launch this year.

NASDAQ maintains 2019 Bitcoin futures launch. According to a Bloomberg report, NASDAQ will likely stick with its plans to list Bitcoin futures contracts in Q1 2019, despite the weakness of crypto markets over the last year. Bloomberg noted that NASDAQ is “currently working through regulatory issues with the CFTC.”

ECB instant payments network goes live.  The European Central Bank (ECB) has launched a new system, Target Instant Payment Settlement (TIPS), to settle eurozone payments in seconds and help European banks compete with payment offerings from big tech firms like Apple, Google and PayPal. To date, only eight small- to medium-sized banks from Spain, Germany and France have signed up

Marriott reveals data breach to 500M customers.  The global hotel chain revealed a breach to its Starwood reservation system, with hackers stealing the personal data of up to 500 million customers. Investigations following discovery of the breach in September revealed that hackers first gain accessed to the system in 2014. Marriott acquired Starwood for $13.6 billion in 2016.

Fraud causes significant losses for Venmo.  The PayPal-owned money transfer service reported an operating loss of about $40 million in Q1 2018, with higher-than-expected losses due to fraud. Venmo executives have acknowledged that “fraud levels are on the rise across the board,” and the company has since stopped instant bank account transfers and blacklisted tens of thousands of users.

Monzo prepares for a £20M crowdfunding campaign. U.K. challenger bank Monzo is following up its recent £85M funding round with a crowdfunding campaign that will be available to existing investors on December 3 and the broader public on December 5. Additionally, eligible Monzo customers will be able to invest up to £2000 through the bank’s app.

European fintechs go East. The FT reports on the entry of some of Europe’s leading fintechs into Asian markets. U.K. challenger bank Revolut has been granted licenses to operate in Japan and Singapore, with the latter earmarked as its regional hub. Online wealth manager Nutmeg plans to launch in Hong Kong next year, working with Hong Kong-based financial services group Convoy, its biggest shareholder.

U.K. bank IT failures more than doubled in 2018. A recent survey from the U.K. Financial Conduct Authority of 300 supervised firms found a year-over-year increase of 138% in technology outages, as well as an 18% increase in cyber incidents. Issues of top concern noted in the survey included third-party oversight, internal and system controls, and talent acquisition and retention.

State Street sees no urgency to move into crypto custody. State Street’s managing director for digital product development and innovation noted that clients are not currently looking to the bank to hold crypto assets, though there is a “high level of interest” in the service. The comment comes as institutions like Fidelity have taken up crypto as an asset class.

SEC Chair bearish on crypto ETF approval.  SEC Chairman Jay Clayton said that concerns about cryptocurrency market manipulation must be addressed before a crypto-based ETF could be approved, but that he doesn’t see a “particular path” to such approval. He added that questions about custody also play a role in any ETF approval analysis.

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