Fall 2021 FinTech Monitor

FinTech Monitor Central

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The FinTech Monitor provides commentary on legal developments relating to financial technology innovation. Our focus includes payment and money transfer technology, the prepaid card industry, Bitcoin and other cryptocurrencies, peer-to-peer lending, and crowdfunding.

FDIC Insurance for Crypto Companies

By: Jeffrey Alberts

September 19, 2022 - This August, the Federal Deposit Insurance Corporation issued letters to five different cryptocurrency companies demanding that they cease and desist from making false and misleading statements about FDIC insurance.

Government Insider Trading Cases Threaten Crypto Industry

By: Jeffrey Alberts

September 7, 2022 - This July, the DOJ brought another insider trading criminal case based on the trading of digital assets. This case was brought against a former Coinbase employee and came just one month after the same office brought another insider trading case against a former employee of the NFT trading platform OpenSea.

Alberts Discusses SEC’s Crypto Insider Trading Case

By: Jeffrey Alberts

July 25, 2022 - Pryor Cashman Partner Jeffrey Alberts, who co-heads the firm’s FinTech Group, talked to Law360 about the U.S. Securities and Exchange Commission’s insider trading lawsuit against a former manager from cryptocurrency exchange Coinbase. In “SEC Tests Its Reach With Coinbase Insider Trading Case,” Jeff discusses the dynamics at play between the SEC and the ex-Coinbase employee, Ishan Wahi.

Hertell Discusses NFTs and Blockchain’s Potential Uses in Real Estate Transactions

By: Hans Hertell

July 20, 2022 - Pryor Cashman Partner Hans H. Hertell, a member of the firm’s NFTs, Media + Entertainment, and Intellectual Property Groups, spoke with Law360 about potential use cases for NFTs and blockchain in real estate transactions. In “Why Real Estate Lawyers Should Keep An Eye On Blockchain,” Hans talked about a recent transaction in which a blockchain-driven real estate company used a non-fungible token (NFT) for a residential property sale.

The CFPB’s Fintech Power Grab

By: Jeffrey Alberts, Dustin Nofziger

June 29, 2022 - Pryor Cashman Partner Jeffrey Alberts, who co-heads the firm’s FinTech Group, and Counsel Dustin Nofziger co-authored an article, “The CFPB’s Fintech Power Grab,” for the New York Law Journal. The article examines an April 2022 announcement by the Consumer Financial Protection Bureau (CFPB) “that it intends to begin using a ‘dormant’ authority to conduct regulatory examinations of nonbank financial companies when they pose risks to consumers.”

CFPB Targets Use of Artificial Intelligence

By: Jeffrey Alberts

June 28, 2022 - Last week, the DOJ settled a groundbreaking case against Meta Platforms (formerly Facebook) based on allegations of what it described as “algorithmic discrimination” under the Fair Housing Act. The Consumer Financial Protection Bureau (CFPB) has made clear that it also intends to target algorithmic discrimination and the use of artificial intelligence by financial institutions.

Kamaraju on Crypto Compliance With Russia Sanctions

By: Sidhardha Kamaraju

June 28, 2022 - Sidhardha “Sid” Kamaraju, a Partner in Pryor Cashman’s White Collar Defense + Investigations, Financial Institutions, and Litigation Groups, co-authored an article with Paul Hinton, Principal at The Brattle Group, about issues facing cryptocurrency businesses working to comply with sanctions against Russia.

CFPB’s New Nonbank Exam Process

By: Jeffrey Alberts

June 21, 2022 - The Consumer Financial Protection Bureau (CFPB) announced in April that it is going to use a rarely used legal provision to start examining nonbank financial institutions that pose risks to consumers.

NFT Insider Trading Case Against OpenSea Employee

By: Jeffrey Alberts

June 14, 2022 - Earlier this month, the U.S. Attorney’s Office in the Southern District of New York announced insider trading charges against a former employee of OpenSea related to the trading of NFTs.

Breaking It DAOn: What You Need to Know About Current DAO Laws

By: Robert J. deBrauwere, Nicholas Saady

May 9, 2022 - Robert deBrauwere and Nicholas Saady recently authored an article titled "Breaking It DAOn: What You Need to Know About Current DAO Laws," which was published in the Legaltech News section of Law.com. Their article shares insight into new global legislation regarding decentralized autonomous organizations (DAOs) and other legal issues that are emerging or are likely to emerge in the DAO space.

Is the SEC's Regulation of Crypto Lenders Self-Defeating?

By: Jeffrey Alberts

March 30, 2022 - U.S. holders of cryptocurrency have been eager to participate in the crypto lending market, but recent actions by the SEC are causing unexpected, and likely unintended, changes in how these loans are made.

Russia Sanctions for Crypto Companies

By: Jeffrey Alberts

April 8, 2022 - The U.S. government has recently announced a variety of sanctions against certain Russian oligarchs, Russian entities and regions of Ukraine. There's a number of ways in which this can impact cryptocurrency and blockchain companies, even those that are not doing business in the United States.

FinCEN's New Kleptocracy Bounties

By: Jeffrey Alberts

April 4, 2022 - On March 16, FinCEN announced the creation of the Kleptocracy Asset Recovery Program, which is aimed at offering rewards to people who provide information to the U.S. government about various stolen assets that are linked to the Russian government. It can implicate people who work at financial institutions, as well as a number of other types of companies that are involved in high value transactions, such as transactions involving real estate, artwork, luxury goods, or crypto assets.

Fall Blockchain Update Episode 5: China’s Crypto Crackdown

By: Jeffrey Alberts

October 25, 2021 - Last month China’s central bank declared that all cryptocurrency-related transactions are illegal. Many blockchain companies, as well as financial institutions with indirect exposure to cryptocurrencies, are trying to figure out what this means for them.

Fall Blockchain Update Episode 4: DOJ Crypto Team

By: Jeffrey Alberts

October 21, 2021 - Earlier this month, the U.S. Department of Justice announced the creation of a National Cryptocurrency Enforcement Team. This has caused concern about possible future criminal prosecution of cryptocurrency companies and their employees.

Fall Blockchain Update Episode 3: SEC vs Coinbase

By: Jeffrey Alberts

October 15, 2021 - Coinbase, the largest U.S. cryptocurrency exchange, has been openly criticizing the S.E.C. for threatening to sue Coinbase if it paid interest to customers on their cryptocurrency deposits. This disappointed Coinbase’s customers. It also terrified many of Coinbase’s competitors, who already offer their customers similar products.

Fall Blockchain Update Episode 2: Kraken Fine

By: Jeffrey Alberts

October 11, 2021 - Last month the Commodity Futures Trading Commission (CFTC) imposed a fine on Kraken, one of the largest digital asset exchanges in the United States. The CFTC asserted that Kraken was illegally offering margined retail commodity transactions in digital assets, including Bitcoin, and failed to register as a futures commission merchant.

Fall Blockchain Update Episode 1: DEX Regulation

By: Jeffrey Alberts

September 15, 2021 - The use of decentralized exchanges (“DEXs”) to execute cryptocurrency trades has exploded this year. Earlier this month, however, the Wall Street Journal reported that the main developer of one of the world’s largest DEXs is being investigated by the U.S. Securities and Exchange Commission. This has caused a great deal of concern over whether regulators are going to seek to regulate or even shut down DEXs.

Surge in Cybersecurity Enforcement Actions

By: Jeffrey Alberts

July 21, 2021 - Regulators have been ramping up enforcement actions based on cybersecurity program deficiencies. In a new video, Jeffrey Alberts, co-chair of Pryor Cashman's Financial Institutions Group, discusses the types of enforcement actions we have seen so far this year and what regulated businesses can do now to reduce the risk of facing a cybersecurity enforcement action.

FinCEN Moves Toward Beneficial Ownership Registry

By: Jeffrey Alberts

April 7, 2021 - This week, FinCEN published an advance notice of proposed rulemaking for a rule implementing the beneficial ownership reporting provisions of the Corporate Transparency Act. In this video, Jeffrey Alberts, co-chair of Pryor Cashman's Financial Institutions Group, discusses the proposed rule and shares a few thoughts on what financial institutions should do now to prepare.

State AGs Challenge OCC True Lender Rule

By: Dustin N. Nofziger

January 12, 2021 - In an expected move, last week state attorneys general filed a federal lawsuit requesting that the OCC’s recently promulgated true lender rule be set aside as unlawful.

The OCC’s true lender rule, codified to 12 C.F.R. § 7.1031, provides that a national bank or federal savings association makes a loan when the bank is named as the lender in the loan agreement or funds the loan. The rule is designed to eliminate uncertainty as to which entity – e.g., the bank or its FinTech partner, such as a marketplace lender – makes a loan. The distinction is important because while national banks and federal savings associations are permitted to charge the maximum interest rate permissible in the state in which they are located and to “export” that interest rate to borrowers in other states, non-bank FinTechs do not enjoy similar federal preemption of state usury laws. The new true lender rule is intended to operate in tandem with the OCC’s “Madden-fix” or permissible interest rate rule, on which we have previously reported, which provides that the interest on a loan issued by a national bank or federal savings association “shall not be affected by the sale, assignment, or other transfer of the loan” (e.g., to a FinTech partner).

FDIC’s New ILC Parent Company Rule Benefits FinTechs

By: Dustin N. Nofziger

January 3, 2021 - State industrial loan company (“ILC”) charters have long been of interest to commercial firms that wish to provide banking services to customers, but that do not wish to be regulated as holding companies by the Federal Reserve Board. ILCs generally offer customers limited deposit products and commercial and/or consumer loans (e.g., credit cards). Recently, ILC charters have come into focus as of interest to FinTechs, with the FDIC approving deposit insurance applications by Square Financial and NelNet to create de novo ILCs.

FDIC’s New Brokered Deposit Rule Benefits Bank-FinTech Partnerships

By: Dustin N. Nofziger

December 23, 2020 - On December 15, 2020, the FDIC issued a final rule that will be helpful to app-based FinTech services that facilitate consumer savings accounts. This rule will allow banks and FinTechs to structure consumer savings account partnerships that avoid triggering brokered deposit designations. The new rule, which will become effective April 1, 2021, achieves this result through modifications to the regulatory definition of “deposit broker” and to the “primary purpose” exception to that definition.

OCC OK’s Banks Taking Stablecoin Reserve Deposits

By: Jeffrey Alberts

October 5, 2020 - On September 21, the OCC clarified in an interpretive letter that federally chartered banks and thrifts may take reserves on behalf of customers who issue cryptocurrency stablecoins. As Jeff Alberts, co-head of the FinTech Group, discusses in this video, taking stablecoin reserve deposits represents a potentially lucrative opportunity for federally chartered banks. To learn more about the benefits and challenges of accepting stablecoin reserve deposits, check out the video below.

The OCC Keeps Fighting New York Over FinTech Charters

By: Jeffrey Alberts

May 5, 2020 - On April 23, 2020, the Office of the Comptroller of the Currency (“OCC”) filed a brief supporting its appeal of a decision by a federal judge in New York ruling that the OCC cannot issue “FinTech Charters” to non-depository institutions. This continues the fight between New York’s Department of Financial Services (“DFS”) and the OCC over who should regulate FinTech companies, which we have discussed before.