TFU | July 8-14

Leading Off

Fed Chair Jerome Powell joined the growing chorus of regulators raising flags about the Facebook-backed Libra cryptocurrency; German digital bank N26 launched operations in the U.S. market; payments processor Stripe suffered downtime issues that halted online sales for many businesses; British Airways and Marriott were both fined over $100 million by the U.K. ICO for data breaches, while Facebook faces a $5 billion fine from the FTC; and the EU and U.K. are looking for ways to stem the use of cryptocurrency services to launder money.

In the News

Libra, Libra, Libra.  Continuing the trend of regulatory commentary, Federal Reserve Chair Jerome Powell said the Libra project raises “many serious concerns” and poses risks to global financial stability. Powell echoed the concerns expressed in her recent letter to Facebook from Rep. Maxine Waters, who called on the company to halt Libra’s rollout until after regulators have vetted the project. Meanwhile, according to a Financial Times report, “US and European banks are steering clear of Libra . . . for fear of antagonising regulators and cannibalising their own digital currency projects.”

FTC to fine Facebook nearly $5B.  The U.S. Federal Trade Commission (FTC) plans to fine the social media giant for violations related to its Cambridge Analytical scandal and the FTC’s ongoing reviews of its privacy program under its 2011 consent order. $5 billion would be the largest fine ever issued by the FTC – but critics say it is still too small, equalling only about one quarter of Facebook’s annual revenue.

N26 goes live in United States.  The German digital bank officially launched in the U.S., after nearly two years of preparations. The firm has partnered with Axos Bank to provide U.S. customers with a white label bank account and debit card, with features including no monthly fee, no minimum balance, and no foreign transaction fees. N26 currently has 100,000 people on its U.S. waitlist.

Crypto exchanges look at self-regulation.  Several cryptocurrency exchanges with U.S. operations – including Gemini, bitFlyer, and BitStamp – are seeking legal counsel support to develop enforcement policies and best practices for the Virtual Commodity Association (VCA). The VCA was established to set standards and help oversee the crypto industry, aiming to become a self-regulatory organization.

Stripe users hit with rare downtime issues.  The San Francisco-based payments firm was hit with a two-hour outage last week, one of its longest-ever periods of downtime. Companies that use Stripe to process payments or accept orders were unable to do so during the outage, leading many to complain on social media; one startup said it lost roughly $100,000 in sales that it cannot recoup. 

JPMorgan launches robo-advisor.  The bank rolled out You Invest, a digital investment service aimed at customers seeking to invest as little as $2,500 in funds. The robo-advisory service uses a consumer’s preferences to build a bespoke portfolio of JPMorgan ETFs based on the individual’s risk tolerance, financial goals, and time horizon.

Deutsche Bank to spend €13B on tech, post job cuts.  As part of an operational reorganization to cut costs, which will eliminate about 18,000 jobs, the German bank plans to spend €13 billion on new technology over the next four years. Chief executive Christian Sewing wrote a letter to all employees discussing the plan, saying the investment will increase the bank’s innovation and efficiency over time.

BA and Marriott face large fines for GDPR violations.  The U.K.’s data protection regulator, the Information Commissioner’s Office (ICO), issued notices of intent to fine British Airways £183 million and Marriott £99 million for data breaches discovered in 2018. The proposed fines are largest to date under the EU’s General Data Protection Regulation (GDPR).

Bitcoin ATMs show gap in EU’s money laundering rules.  Spanish police claim that a recent move to take down a money laundering scheme — which used bitcoin ATMs as a front for illegal drug payments — has exposed a loophole in European AML laws. Rules designed to force money handlers to vet their clients don’t apply to the cash machines’ owners or to cryptocurrency trading platforms.

U.K. crackdown on crypto assets money laundering.  The Economic Crime Plan, an initiative between the U.K. government and the private sector, seeks to build “one of the most comprehensive global responses to the use of cryptoassets in illicit activity”. The plan also includes funding from major U.K. banks to reform the Suspicious Activity Reporting regime and encourages technology innovation.

Fed’s  Powell says bitcoin is more akin to gold than currency.  Speaking before the U.S. Senate Banking Committee, Federal Reserve Chair Jerome Powell argued that, “almost no one uses bitcoin for payments, they use it more as an alternative to gold . . . a speculative store of value.” Powell had been asked whether a global cryptocurrency would “diminish or remove the need for a reserve currency.”

 

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