This week, two committees in the House of Representatives will mark up legislation intended to clarify the regulatory framework applicable to digital assets in the United States. Earlier this month, leaders in the U.S. Senate also introduced legislation to establish a comprehensive and unified regulatory scheme for digital assets and digital asset derivatives.1 Both the House and Senate bills seek to integrate the regulation of digital assets and digital asset derivatives into the existing U.S. regulatory framework — primarily that of the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) — rather than create a standalone framework, but both bills face significant barriers to enactment.
The committee of government and regulatory authorities responsible for open banking in the UK has set out its plans and timeframes for expanding and developing infrastructure, standards, and processes for the sector. Central among these are proposals to improve the performance of interfaces among relevant firms, mitigate financial crime risks, and ensure that end users receive sufficient information and are protected if something goes wrong. This Sidley Update summarises the proposals and key points for firms.
The Consumer Financial Protection Bureau (CFPB) on October 27, 2022 took the long-anticipated first step to issue a regulation implementing Section 1033 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. This followed a preview by CFPB Director Rohit Chopra at the Money 20/20 conference on October 25 in which he outlined the “CFPB’s new approach to regulation,” which is designed to create “catalysts for more competition.” With respect to Section 1033, Director Chopra said that the CFPB is “exploring safeguards to prevent excessive control or monopolization by one, or even a handful of, firms” and will be working toward avoiding regulations that could be “rigged in favor of some players over others.” Director Chopra’s focus on competition as an essential element of consumer protection has been a hallmark of his directorship.
Changes to uniform U.S. state law commercial law rules for transactions in digital assets, including cryptocurrencies, tokens, electronic notes, and electronic chattel paper, are being finalized this summer and may be adopted in state legislatures as early as this fall. When adopted, these rules will create a uniform playing field with more certainty for transactions in digital assets — but can also hold some surprises for those not prepared. Everyone with an interest in digital assets — exchanges, custodians, holders, issuers, and lenders — should stop now to consider how these new rules will apply to their businesses and whether changes in their practices and contracts are warranted. They should also consider whether the new laws create new opportunities. Learn how the new rules apply to you and your business. (more…)
Last week, the UK Competition and Markets Authority (CMA) hosted its inaugural Data, Technology, and Analytics (DaTA) Conference.
The CMA DaTa Conference has been hailed as a milestone as it convened for the first time regulators, data scientists, engineers, tech companies, and academics to discuss evolving challenges in digital markets. The conference coincided with London Tech Week, during which Chris Philp, UK Minister for Tech and the Digital Economy, unveiled a new UK Digital Strategy: the UK government’s vision for regulating digital markets, involving a monitoring framework and outcomes-focused regulation. The government has opened a public consultation, and stakeholders have until September 5, 2022, to offer their views on the proposed approach.
Against this background, here is our selection of the top five trends that stood out over the course of the CMA DaTa Conference. (more…)
On June 15, 2022, the U.S. Securities and Exchange Commission (Commission) issued a request for comment with respect to whether certain index, model, pricing, and other information providers should be regulated as investment advisers under the Investment Advisers Act of 1940. The Commission suggests fresh consideration is needed in light of changes in technology and market practices in the decades since these topics were last given significant attention — especially given the continuing expansion of index-based investment strategies. Responses to the request for comment are due the later of August 16, 2022, or 30 days after publication of the release in the Federal Register. (more…)
On March 9, 2022, President Joe Biden signed an executive order (EO) to engage several federal agencies in a comprehensive review of the federal government’s approach to cryptocurrencies and digital assets. The broad scope of the EO outlines a unified, “whole-of government” approach to developing policy for digital assets across five key priorities: (1) potential introduction of a United States Central Bank Digital Currency (CBDC); (2) consumer, investor, and business protection; (3) financial stability and systemic risk; (4) illicit finance and national security; and (5) U.S. leadership in the global financial system and economic competitiveness. The EO also focuses on the impact that blockchain technology and digital assets can have on financial inclusion and human rights (including the unbanked and underbanked) as well as on climate change and environmental pollution (including energy usage from mining and grid management). (more…)
On November 23, 2021, the Office of the Comptroller of the Currency (OCC) published Interpretative Letter No. 11791 (the Letter) clarifying the authority of national banks and federal savings associations (Banks) to engage in certain cryptocurrency, distributed ledger, and stablecoin activities. The Letter also addresses the nature of the interaction between state law and the National Bank Act for purposes of OCC oversight of trust and fiduciary activities of national banks, including national trust banks. The Letter reflects the intent of Acting Comptroller Michael J. Hsu to reset expectations regarding the expansion of Bank activities related to cryptocurrency. Concurrently, the OCC, the Board of Governors of the Federal Reserve System, and the Federal Deposit Insurance Corporation (the Agencies) released a joint statement alerting the industry of their intent to provide additional guidance in the coming months concerning certain activities related to cryptoassets conducted by banking organizations. The guidance is expected to address topics such as legal permissibility, expectations for safety and soundness, consumer protection, application of capital and liquidity standards, and compliance with existing laws related to such activities.
Article I: Digital Asset Overview and Methods to Gain Exposure to Digital Assets
Given the growth of markets for cryptocurrencies and other blockchain-based assets, often referred to as “digital assets,” we see growing interest from traditional investment managers in gaining exposure to this emerging asset class. We have seen development of many new products and service offerings to facilitate institutional investment in digital assets over the past year. With the recent announcement of the first bitcoin-exchange traded fund, this week, we expect continued and expansive growth in this area. This article aims to serve as an introductory guide to digital asset investing for institutional investors by describing at a high level the available service offerings and potential avenues for investment managers to gain exposure to the digital assets space.
On September 30, the U.S. Senate confirmed Commissioner Rohit Chopra of the Federal Trade Commission as the new Director of the Consumer Financial Protection Bureau (CFPB). Director Chopra is expected to usher in a regime of dramatically increased enforcement and creative, expansive regulation. Many financial institutions will have questions and concerns about the CFPB, how it will affect their businesses and operations, and how to productively engage with this exceptionally powerful and opaque regulator. It is now more important than ever to closely follow the work of the CFPB as new leadership seeks to aggressively employ all of the agency’s tools in service of the American consumer. (more…)