Global Fintech & Digital Assets Blog

E-Money, Payment Services, and Insolvency

Posted in Payments

Consumers and service providers should take note of some of the enhanced risks upon an e-money institution’s insolvency.

By Hongbei Li

Technology is rapidly changing the way customers and businesses interact with financial systems. Fintech companies are a driving force behind the disruption of traditional banking and payment services, with regulatory innovation close behind.

In the 12 months to June 2021, electronic money institutions (EMIs) in the UK processed more than £500 billion of transactions, according to Financial Conduct Authority (FCA) data. In 2019, UK EMIs held £10 billion in customer funds, the UK government estimates. By 2025, more than seven in 10 smartphone owners will be mobile P2P payment users. As a major remittance source country, the UK has seen a 30% growth in its digital remittance market in 2021. According to Statista, this market is predicted to grow to more than $4.6 billion by 2025. These trends are fuelling the UK’s ambition to become a world leader in payments innovation.

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LBRY Ruling: A Nice Read for the SEC

Posted in Blockchain, Cryptoassets

In granting the SEC’s motion for summary judgment, a federal court ruled that sales of LBC tokens were securities transactions.

By Stephen P. WinkDouglas K. Yatter, Jack McNeily, Benjamin Naftalis, Adam Zuckerman, and Deric Behar

On November 7, 2022, the Securities and Exchange Commission (SEC) prevailed in a motion for summary judgment against blockchain-based streaming and publishing firm LBRY, Inc. The US District Court for the District of New Hampshire (the Court) considered the motion papers and oral argument, determining that with no triable defense, “LBRY offered LBC [LBRY Credits, the protocol’s native token] as a security.” LBRY therefore violated Sections 5(a) and (c) of the Securities Act of 1933 by offering LBC to investors without proper registration.

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Dubai Financial Services Authority Issues New Regime to Regulate Crypto Tokens

Posted in Cryptoassets

The regime introduces rules on various crypto tokens, including cryptocurrencies and stablecoins, in the Dubai International Financial Centre.

By Brian A. Meenagh, Matthew Rodwell, and Ksenia Koroleva

On November 1, 2022, the Dubai Financial Services Authority (DFSA) crypto token regulatory regime came into effect.

The rules expand upon the DFSA framework for regulating investment tokens established in 2021 (the 2021 Rules). The Dubai International Financial Centre (DIFC) regime defines a token as a cryptographically secured digital representation of value, rights, or obligations which may be issued, transferred, and stored electronically, using distributed ledger technology (DLT) or other similar technology. The 2021 Rules only regulated investment tokens, which comprised security tokens and derivative tokens (in essence, tokenized equivalents of conventional securities and derivatives, respectively) (the Investment Tokens). Pursuant to the 2021 Rules, persons carrying out certain activities with Investment Tokens (e.g., issuing, offering, holding, promoting, dealing, advising, brokering) need to obtain approval from the DFSA and comply with certain obligations.

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The Law Commission of England and Wales Proposes to Classify NFTs as Data Objects

Posted in Blockchain, Cryptoassets, Non-Fungible Tokens

NFT creators and consumers should evaluate the legal and commercial considerations of NFTs that are linked to copyright work.

By Andrew Moyle, Christian McDermott, and Avinash Balendran

The Law Commission of England and Wales (the Commission) is a statutory independent body that keeps the law of England and Wales under review and recommends reform where it determines that it is needed. The Commission recently published a public consultation paper on digital assets which closed on 4 November 2022. One of the key proposals in the paper is the recognition of a third category of personal property, labelled “data objects”.

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Hong Kong Launches International Carbon Marketplace, Singapore Introduces ESG Hub

Posted in Investing in Fintech

Hong Kong’s Core Climate aims to facilitate trading of carbon credits, while the Hub plans to expedite Singapore’s ESG ecosystem growth.

By Farhana Sharmeen, Paul A. Davies, and James Bee

On 28 October 2022, the Hong Kong Exchange and Clearing Limited (HKEX) launched Core Climate, Hong Kong’s International Carbon Marketplace. The birth of Core Climate is a further step toward the growth of ESG initiatives in Asia, which are gaining particular traction among the continent’s stock exchanges.

HKEX hopes that Core Climate will support the global energy transition by facilitating an effective and transparent trading of carbon credits. Participants on the Core Climate platform will be able to trade, hold, settle, source, and retire voluntary carbon credits, and the platform’s carbon credits will come from internationally certified projects around the world, including carbon avoidance, reduction, and removal projects. All projects listed on Core Climate are verified against international standards, but whether HKEX will publish a specific list of international standards acceptable for this purpose is not clear at this stage.

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Hong Kong Continues Developing Its Virtual Asset Framework

Posted in Cryptoassets

The latest statements from the government and regulators indicate that Hong Kong is moving forward with enhancing its virtual asset regulatory and legal regime.

By Simon Hawkins and Adrian Fong

The Hong Kong government and the Securities and Futures Commission (SFC) announced their policy stances and further measures to support the development of virtual assets (VA) in Hong Kong at the Hong Kong Fintech Week 2022. Senior government officials and regulators expressed support for Hong Kong to continue to establish a responsible legal and regulatory framework to develop its VA industry.

The Financial Services and the Treasury Bureau (FSTB) published a policy statement recognizing that VAs were “here to stay” and would create opportunities in finance, e-commerce, Web3, and the Metaverse for Hong Kong. Consistent with the policy approach that Hong Kong’s financial services regulators previously mentioned, the government intends to adopt the “same activity, same risks, same regulation” principle to manage risks alongside innovation.

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Antitrust Matters: What Digital Asset Innovators Need to Know

Posted in Blockchain, Cryptoassets, Fintech Regulation, Uncategorized

Unpacking three key competition issues for digital asset innovators and investors: M&A, interlocking directorates, and interoperability.

By Kelly Fayne, Anna Rathbun, and Evan Omi

In a sea of regulatory hurdles and issues, antitrust and competition laws may be low on the list of concerns of digital asset innovators and investors. But competition in the digital asset space is front of mind for key industry regulators. On October 24, 2022, SEC Chair Gary Gensler noted in a speech at the SIFMA Annual Meeting:

“We’ve [] seen centralization in the crypto market, which was founded on the idea of decentralization. The field actually has significant concentration among intermediaries in the middle of the market. Thus, we must remain vigilant to areas where concentration and potential economic rents have built up; or may do so in the future.” (emphasis added)

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White House Issues Digital Asset Framework

Posted in Cryptoassets

The comprehensive framework, which spans multiple reports, aims to spur risk mitigation efforts and potentially a US central bank digital currency.

By Alan W. Avery, Arthur S. Long, Yvette D. Valdez, Stephen P. Wink, Douglas K. Yatter, Pia Naib, Adam Bruce Fovent, and Deric Behar

On September 16, 2022, the White House published a fact sheet described as the first-ever “Comprehensive Framework for Responsible Development of Digital Assets” (the Framework). The Framework articulates the Biden Administration’s intended approach to the responsible development of the digital asset space and comes in response to a range of reports from various financial services regulators that were released over the previous few months. These reports include three that the Department of the Treasury published on the same day as the Framework, addressing the future of money and payment systems, consumer and investor protection, and illicit finance risks. Continue Reading

The Book of Jargon® — Blockchain, Crypto & Web3 Now Available

Posted in Blockchain, Cryptoassets, Non-Fungible Tokens

Mobile and desktop reference tool defines nearly 600 industry terms.

Latham & Watkins has published the second edition of The Book of Jargon® — Blockchain, Crypto & Web3, a comprehensive digital glossary developed for the business, academic, and legal communities. The resource renders the often complex vocabulary, acronyms, and slang of the blockchain, cryptocurrency, and Web3 sector more accessible and understandable to all.

With nearly 600 terms, the user-friendly glossary is roughly double the size of the first edition, incorporating hundreds of new terms to reflect developments in key areas such as decentralized finance (DeFi), non-fungible tokens (NFTs), and the metaverse.

The Book of Jargon® — Blockchain, Crypto & Web3 is available as an online resource, a PDF, and a free mobile app in the App Store and on Google Play. It can also be accessed on the firm’s website under the Digital Assets & Web3 practice page.

See Latham’s entire Book of Jargon® series here.

UK to Open Up Text and Data Mining Under New Copyright and Database Rules

Posted in Data Privacy, Cybersecurity, and AI

A proposed broad copyright exception for text and data mining that favours AI developers is unlikely to be welcome news for rightholders.

By Deborah Kirk, and Brett Shandler

On 28 June 2022, the UK government published its response to its consultation on “Artificial Intelligence and IP: Copyright and Patents”, which commenced in October 2021 (Response).

Among other points,[1] the government has indicated its intention to introduce a new copyright and database exception that allows text and data mining (TDM) for any purpose, provided that the party employing TDM obtains lawful access to the material. Continue Reading