Global Fintech & Digital Assets Blog

Digital Services Act: Practical Implications for Online Services and Platforms

Posted in Digital, Fintech Regulation

The DSA has a broad scope and regulates many aspects of digital services, including in the fintech space.

By Gail E. Crawford, Jean-Luc Juhan, Susan Kempe-Mueller, Deborah J. Kirk, Lars Kjølbye, Elisabetta Righini, Sven B. Völcker, Ben Leigh, Victoria Wan, and Amy Smyth

As a key part of the EU’s digital regulation strategy, the Digital Services Act (DSA) seeks to modernise legal frameworks and create a safer and more open digital environment.

It regulates many aspects of digital services, including liability for online content and services, targeted advertising, know-your-business-customer requirements, transparency for users, and managing systemic platform risks.

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Key Legal Considerations in Commercial Rights Licenses for Content-Based NFTs

Posted in Blockchain, Cryptoassets

As content-based NFT projects seek to provide NFT owners with value beyond being scarce collectibles, they should consider whether to grant owners rights to commercialize the content underlying the NFTs.

By Ghaith Mahmood, Heather Lui, and Justin Tzeng

As the ecosystem for non-fungible tokens (NFTs) continues to mature, the discourse around content-based NFTs[1] has increasingly focused on the utility that accrues to NFT holders. NFT holders increasingly want to understand what specific bundle of rights and privileges they are acquiring when holding a content-based NFT. Among the most important of these rights are the intellectual property (IP) rights that NFT holders are granted in the artwork linked with a particular NFT. By default, purchasing an NFT only conveys ownership of the NFT as a unique token on a particular blockchain protocol, and absent further contractual language, does not transfer ownership of the underlying IP rights in any media associated with that NFT.

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Blockchain Regulatory Certainty Act Would Protect Non-Custodial Crypto Services

Posted in Blockchain, Cryptoassets

The bipartisan bill would provide a federal safe harbor for non-custodial blockchain service providers from state money transmission and digital asset licensing laws.

By Arthur S. Long, Parag Patel, Yvette D. ValdezStephen P. Wink, Pia Naib, and Deric Behar

On March 23, 2023, US House of Representatives Majority Whip Tom Emmer (R) and Representative Darren Soto (D) introduced the Blockchain Regulatory Certainty Act (the Bill).

The short Bill is singular in purpose: it would clarify that blockchain service providers that do not custody or control user funds (such as developers, crypto miners, validators, and wallet software providers) are not money transmitters for the purposes of state money transmission and licensing laws or under US anti-money laundering laws. Non-custodians would also not be considered financial institutions under the Bank Secrecy Act, 31 U.S.C. §§ 5311 et seq., as amended, or “any other State or Federal legal designation requiring licensing or registration as a condition to acting as a blockchain developer or provider of a blockchain service.”

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Illinois Considering Crypto Licensing

Posted in Cryptoassets, Fintech Regulation

A legislative initiative in Illinois would establish licensing and consumer protection requirements for digital asset businesses serving consumers in the state.

By Jack Barber, Parag Patel, Arthur S. Long, John J. Sikora, Stephen P. Wink, Pia Naib, and Deric Behar

On February 21, 2023, the Illinois Department of Financial and Professional Regulation (IDFPR) announced the Consumer Financial Protection and Innovation Package, which was introduced in both chambers of the Illinois General Assembly, consisting of two key legislative proposals: the Fintech-Digital Asset Bill and the Consumer Financial Protection Bill (the Bills). The Fintech-Digital Asset Bill “establishes regulations for digital asset[1] businesses and modernizes regulations for money transmission in Illinois.”

The Consumer Financial Protection Bill would enhance the IDFPR’s ability to enforce those regulations, along with additional authority and resources to enforce existing consumer financial protections.

Specifically, the Fintech-Digital Asset Bill would enact the Digital Assets Regulation Act (the Act), applicable to digital asset business activity in Illinois, when conducted with or on behalf of an Illinois resident, regardless of where the business is located and insofar as preemption by federal law is not a factor. The Act represents an effort to implement a comprehensive digital asset licensing regime for Illinois, and mirrors many aspects of the New York BitLicense.

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Wyoming Stable Token Act Enacted Into Law

Posted in Blockchain, Cryptoassets

By authorizing the issuance of a stable token, “Blockchain Valley” leads the way in state digital asset adoption and integration.

By Jenny Cieplak, Arthur S. Long, Yvette Valdez, Stephen P. Wink, Adam Zuckerman, and Deric Behar

For the last few years, Wyoming has been a leader among US states at the intersection of digital asset innovation, adoption, and regulation. In July 2021, Wyoming became the first state in the nation to allow decentralized autonomous organizations (DAOs) to obtain legal company status by registering in Wyoming as limited liability companies (LLCs) (for more information, see this Latham blog post).

More recently, on March 17, 2023, Wyoming became the first state to enact a bill allowing it to create its own stablecoin. After vetoing the original version of the bill in March 2022, Governor Mark Gordon allowed the updated version SF0127 – Wyoming Stable Token Act (the Act) to go into law, albeit without his signature.

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Podcast: Will Insurtech Reach New Heights in 2023?

Posted in Fintech Regulation, Investing in Fintech, Uncategorized

Poised for a banner year, insurtech has drawn the attention of investors and regulators alike.

Insurtech has become a darling of both traditional players in the insurance market and disruptive fintech operations. The coming year looks to continue this trend, with companies looking to insurtech as a venue for penetrating new markets. Yet as insurtech’s attractiveness continues to grow, potential investors will need to navigate a highly regulated industry and new regulatory considerations on the horizon.

In this episode of Connected with Latham, London partners Beatrice Lo and Shing Lo and associate Gabriel Lakeman discuss the path for insurtech to capture a larger market share in 2023, as well as recent regulatory developments that new and seasoned investors in the industry will need to address.

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HM Treasury Publishes Draft Legislation to Regulate BNPL Lending

Posted in Fintech Regulation

A consultation that will remain open until 11 April 2023 offers further clarity on the proposals to regulate buy-now-pay-later products.

By Rob Moulton, Becky Critchley, Ella McGinn, and Dianne Bell

On 14 February 2023, HM Treasury published its consultation and accompanying draft legislation on the regulation of buy-now-pay-later (BNPL) lending. The consultation follows the proposals in HM Treasury’s prior publications released in October 2021 and June 2022, since the government announced its intention to bring currently unregulated BNPL products within scope of the regulatory perimeter. This latest consultation provides some welcome clarity on the approach to this upcoming sea change for firms operating in the BNPL space.

The key changes will be effected by amending the current fixed-sum interest-free credit exemption in Article 60F(2) of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (RAO). BNPL lending usually falls within this exemption as such agreements meet the conditions as interest-free loans repayable in under 12 months and in 12 or fewer instalments. Article 60F(3), which provides an exemption for running-account credit, will remain unchanged.

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Regulators Are Setting Sights on Crypto Market Manipulation

Posted in Cryptoassets

Cases filed in the past year by the DOJ, CFTC, and SEC represent a new phase in the US government’s digital asset enforcement efforts.

By Douglas K. Yatter, Matthew Valenti, and Deric Behar

Expanding beyond their earlier focus on registration and compliance violations and retail fraud, enforcement agencies have also begun to address other types of conduct involving digital assets. One such area is market manipulation. In the past year, the Department of Justice, the Commodity Futures Trading Commission, and the Securities and Exchange Commission each pursued cases alleging manipulation of the prices of digital assets.

The advent of this type of action has not yet received broad attention, perhaps because most of these cases also involved other types of conduct that may have obscured this novel set of claims. This article, published on Law360 by Latham lawyers Doug Yatter, Matthew Valenti, and Deric Behar, discusses five recent cases of note and offers insights into this emerging area of enforcement.

Dubai Virtual Assets Regulation Authority Enacts New Regime to Regulate Virtual Assets

Posted in Cryptoassets, Fintech Regulation

The new regime specifies licensing and reporting requirements for a range of activities related to virtual assets in the Emirate of Dubai.

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

On February 7, 2023, the Dubai Virtual Assets Regulation Authority (VARA) adopted the Virtual Assets and Related Activities Regulations 2023 (the Regulations) together with four compulsory and seven activity-specific rulebooks.

VARA adopted these Regulations further to Dubai Law No. 4 of March 11, 2022 on the Regulation of Virtual Assets in the Emirate of Dubai (the Law) (for more information, see Latham’s blog post).

The Law granted VARA powers to regulate activities relating to virtual assets in the Emirate of Dubai (excluding the Dubai International Financial Center (DIFC); DIFC has its own regime regulating virtual assets — see Latham’s blog post).

The Law laid down key definitions (such as the definitions of virtual assets (VAs) and distributed ledger technology (DLT)), and provided a broad list of activities requiring a license. The Law entitled VARA to adopt regulations for all relevant activities and VAs.

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ISDA Launches Version 1.0 of Definitions for Digital Asset Derivatives

Posted in Blockchain, Cryptoassets

The Definitions aim to support the safe and efficient development of the digital asset derivatives market through consistent contractual standards.

By Yvette D. ValdezThomas Vogel, Naffie Lamin, Tiiu Lemsalu, and Deric Behar

On January 26, 2023, the International Swaps and Derivatives Association, Inc. (ISDA) published version 1.0 of the long-awaited ISDA Digital Asset Derivatives Definitions (the Definitions), intended to create “an unambiguous contractual framework for digital asset derivatives under the umbrella of the ISDA Master Agreement.” Latham & Watkins LLP was pleased to participate in the development of the Definitions as part of a working group of sell-side and buy-side market participants and digital asset legal advisors.

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