Hello Fintech Friends,

Welcome to another week of fintech policy updates! This week, we explore together the latest developments in the realms of crypto regulation, enforcement, and payments from the past week.

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1. Crypto Regulation

The Federal Bureau of Investigation (FBI) issued a warning to Americans regarding the risks associated with utilizing cryptocurrency services that are not registered as Money Services Businesses (MSBs) to transfer money. The warning urges consumers to exercise vigilance and ensure that any cryptocurrency money-transmitting service they engage with complies with requisite legal standards, such as the collection of Know Your Customer information. The FBI also noted the availability of an online tool administered by the Financial Crimes Enforcement Network (FinCEN) to enable users to verify the registration status of businesses as MSBs.

Across the Atlantic, the EU Parliament has approved a long-anticipated anti-money laundering (AML) regulation targeting large cash transactions and cryptocurrency firms. The regulation creates a unified rulebook for all 27 EU member states and establishes an AML authority headquartered in Frankfurt. Among its provisions, the regulation mandates that EU crypto asset service providers (CASPs) conduct customer due diligence for transactions originating from self-custodial wallets below 1000 euros, while imposing enhanced KYC measures for transactions exceeding this threshold. Furthermore, the regulation prohibits cash payments exceeding 10,000 euros throughout the EU, further fortifying measures against illicit financial activities.

In other international crypto regulation updates, the UK has passed a regulation aimed at enabling law enforcement agencies to seize cryptocurrencies before making arrests; Indonesia and Australia's taxation authorities have signed an agreement to establish a crypto information-sharing arrangement for tax purposes; and the Kenyan government has established a multi-agency group, including the central bank, to lead crypto regulation efforts in the country.

2. Enforcement

Last week saw major enforcement developments in the crypto sphere. Blockchain company Consensys, developer of the famous MetaMask wallet, filed a lawsuit against the U.S. Securities and Exchange Commission (SEC). This preemptive legal action was initiated in response to what Consensys deemed an "unlawful seizure of authority" over Ethereum, particularly concerning the SEC's recent attempts to classify ETH as a security. The lawsuit seeks a federal court declaration affirming that ETH is not a security. The company's legal action was prompted by a Wells notice received from the SEC on April 10, signaling the Commission's intent to pursue enforcement action against Consensys for purported securities law violations related to its MetaMask wallet. Notably, Consensys emphasizes that MetaMask is not a broker under federal law and asserts that its staking service is compliant with securities regulations.

In other news, the SEC has filed a motion seeking $5.3B in disgorgement and civil penalties against Terraform Labs and its co-founder, Do Kwon, following a civil case verdict that found in favor of the SEC. In another legal battle, Ripple has filed an opposition to the SEC’s demand for $2B in penalties in the ongoing SEC v. Ripple case. Meanwhile, Custodia Bank, an aspiring crypto bank based in Wyoming, lodged an appeal against a court ruling that upheld the Federal Reserve's rejection of its application for a master account and membership. Federal prosecutors have charged the founders of privacy-oriented Samourai Wallet with conspiracy to commit money laundering against, alleging their involvement in laundering over $100 million in criminal proceeds. In Texas, the Blockchain Association and Crypto Freedom Alliance of Texas have taken legal action against the SEC to challenge a proposed rule aimed at broadening the definition of a "dealer" to encompass digital assets activities. And in the Philippines, the Securities and Exchange Commission has requested Apple and Google to remove Binance from their respective app stores on the grounds that Binance operates as an unregistered broker.

3. Payments

The National Retail Federation (NRF) submitted a request to a federal judge on April 26 urging the rejection of the proposed settlement of a class-action lawsuit concerning swipe fees imposed on merchants for processing Visa and Mastercard credit card transactions. The NRF's objection centers on the perceived inadequacy of the agreement in addressing the underlying antitrust violations stemming from interchange regulations. According to the NFR, despite prolonged legal battles, the proposed settlement fails to adequately address the systemic challenges faced by merchants. The NFR adds that the proposed reductions in interchange fees are insufficient, especially when compared to existing and proposed fees.

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See you next week!