Hello Fintech Friends,

Welcome to another week of fintech policy updates. This week, we will cover various developments in the realms of crypto regulation, enforcement, central bank digital currencies (CBDCs), decentralized autonomous organizations (DAOs), artificial intelligence (AI), payments, as well the Consumer Financial Protection Bureau (CFPB)’s major rule proposal aimed at reducing credit card late fees.

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1. Crypto Regulation

During his annual testimony to the House Agriculture Committee, Commodity Futures Trading Commission (CFTC) Chair Rostin Behnam reiterated his call for Congress to enact legislation defining regulatory jurisdictions in the crypto sector. He addressed inquiries regarding the Financial Innovation and Technology Act for the 21st Century (FIT Act), which advanced through committees but didn't reach a floor vote. Behnam expressed confidence that if the FIT Act passes, his agency could establish a regulatory framework within a year.

At the state level, Virginia Senate Bill No. 339, aimed at establishing a work group to study cryptocurrencies, blockchain, and crypto mining, was approved by the Senate. Upon the governor's signature, the bill will become law.

Internationally, following the spring budget speech, the U.K. initiated a consultation process regarding the adoption of the Organization for Economic Co-operation and Development (OECD)'s crypto tax reporting framework, with submissions accepted until May 29. Meanwhile, in South Korea, the head of the Financial Supervisory Service reaffirmed the regulator's position that no Bitcoin ETF would be approved without the introduction of new crypto regulations by the government.

2. Enforcement

The Securities and Exchange Commission (SEC) secured a significant victory reinforcing its claims in ongoing legal battles with US crypto exchanges. A court judgment on March 1 deemed certain crypto assets traded on secondary markets, including exchanges, as securities. The case involved Sameer Ramani, linked to former Coinbase product manager Ishan Wahi and his brother Nikhil, who settled with the SEC last May over insider trading charges. Ramani's failure to appear before the court prompted a default judgment.

In other news, the Second Circuit revived a class action lawsuit against Binance, rejecting its dismissal by the lower district court. The suit, initiated in April 2020 by investors alleging securities purchases, was sent back to the district court and will promptly proceed.

In Nigeria, the House of Representatives Committee on Financial Crimes summoned Binance CEO Richard Teng, who failed to appear by March 4. However, on March 5, Binance announced that it is ceasing all Nigerian naira transactions by March 8.

3. CBDCs

Last week, Federal Reserve Chair Jerome Powell's emphasized that the Fed is far from issuing a CBDC. This declaration comes at a time when backing for House Majority Whip Tom Emmer's proposed legislation, the CBDC Anti-Surveillance State Act, has significantly strengthened. The bill has amassed an impressive 120 cosponsors and gained support from a broad coalition of stakeholders.

4. DAOs

Governor Mark Gordon of Wyoming has signed into law a state bill passed on March 7 recognizing DAOs as legitimate entities. This legislation, named the Decentralized Unincorporated Nonprofit Association Act (DUNA), will be effective from July 1. It considers DAOs unincorporated nonprofit associations and enables these organizations to legally operate, generate revenue, and distribute profits to members.

5. AI

Sam Altman's controversial Worldcoin initiative, which involves the use of iris-scanning for biometric data collection in exchange for digital currency, has once again captured attention. Recently, the Spanish Data Protection Agency (AEPD) ordered Worldcoin to halt its operations temporarily. AEPD cited numerous complaints, including concerns about data collection from minors, restrictions on consent withdrawal, and insufficient disclosure about data processing practices. In response, Worldcoin announced its intention to challenge AEPD's order through legal means. A similar situation is unfolding in South Korea, where the Personal Information Protection Commission is investigating Worldcoin's compliance with the Personal Information Protection Act. The commission stated its readiness to take appropriate actions if violations are confirmed.

6. CFPB

CFPB Director Rohit Chopra introduced a rule change on March 5, aiming to slash typical late fees charged by card issuers from an average of $32 to approximately $8, potentially saving families around $220 annually. The rule targets card issuers with over 1 million open accounts, which represent the majority of outstanding balances, while smaller banks and credit unions remain unaffected. However, the proposal faced strong opposition from Republican lawmakers and the banking sector. During a hearing titled “Politicized Financial Regulation and its Impact on Consumer Credit and Community Development,” Rep. Andy Barr (R-KY) criticized the rule, arguing that it could restrict access to financial services. Similarly, the American Bankers Association denounced the change, expressing concerns that it might diminish competition and credit access. Moreover, the U.S. Chamber of Commerce, along with five trade groups, filed a lawsuit against the CFPB in an attempt to halt the implementation of the new rule.

7. Payments

Cash is king, but it is being challenged by digital payments in Norway, prompting government intervention to maintain its accessibility. Reports indicate that the Norwegian government has introduced regulations aimed at preserving consumers' ability to make payments using physical currency. These proposed measures are intended to cater to individuals who are hesitant to embrace or lack access to digital payment methods.

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See you next week!