Hello Fintech Friends,

Welcome to another exciting week of fintech policy updates! This week, we delve into the latest developments in crypto regulation, browse the most important enforcement news, and continue our coverage of fintech-related artificial intelligence (AI) developments.  

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1. Crypto Regulation

Last Tuesday, the Federal Reserve (Fed) announced that it will launch a new supervisory program, which will be focused on supervised banks’ crypto-related activities, encompassing trading, custody, lending, and payments as well as non-bank technology partnerships. State member banks will also be required to obtain written "no-objection" from the Fed before engaging in activities concerning dollar tokens. The Fed said that the goal of the new program is to “foster the benefits of financial innovation while recognizing and appropriately addressing risks to ensure the safety and soundness of the banking system.” However, some observers viewed it as a response to the Clarity for Payment Stablecoins Act, passed by the House Financial Services Committee in July, while others argued it was driven by the recent introduction of PayPal's PYUSD stablecoin.

On the Hill, Sens. Elizabeth Warren (D-MA), Roger Marshall (R-KS), Joe Manchin (D-WV), and Lindsey Graham (R-SC), reintroduced the Digital Asset Anti-Money Laundering Act. The bill mandates industry players conducting digital asset transactions exceeding $10K through offshore accounts to submit a Report of Foreign Bank and Financial Accounts (FBAR) to the Internal Revenue Service (IRS). The bill goes further to categorize various crypto industry entities, including wallet providers and validators, as financial institutions. This designation entails new reporting obligations for transactions surpassing $10K, along with a requirement to report any suspicious activity indicative of money laundering or tax evasion.

Internationally, the Monetary Authority of Singapore has unveiled a comprehensive regulatory framework for single-currency stablecoins (SCS) pegged to the Singaporean dollar or any of the G10 currencies. To ensure value stability, SCS reserve assets will adhere to stringent requirements concerning composition, valuation, custody, and audit. With a minimum base capital of 1M Singapore dollars ($740,000), SCSs will also ensure redemption within five business days upon request.

Turning to the UK, the Bank of England's response to a consultation on systemic stablecoins showed a continued commitment to a robust systemic stablecoin regime. The Bank recommended issuing a collaborative memorandum that clearly defines the roles of various regulatory bodies within this framework.

In Brazil, the Parliament is in the process of passing a legislation that will impose higher taxes on transactions conducted by Brazilians through cryptocurrency exchanges without offices within Brazil. Overseas earnings up to 6,000 Brazilian reais ($1,200) will be exempted from taxation, while graduated tax rates will apply to earnings between 6,000 and 50,000 reais ($10,000), and above.

And in India, as the country concludes its G20 presidency, an intriguing divergence of viewpoints has emerged between the G20 President, the International Monetary Fund (IMF), and the Financial Stability Board (FSB). The IMF and FSB are collaborating on a "synthesis paper" on crypto regulation, scheduled for release by August's end. Unlike India, which is seeking to include the term "ban" in forthcoming reports and synthesis papers as a regulatory approach to crypto, the two international bodies are of the view that there is no global acceptance for a ban and that a ban would be ineffective and costly.

2. Enforcement

Yesterday, in the Securities and Exchange Commission (SEC) v. Ripple lawsuit, the SEC's request to pursue an interim appeal was approved by Judge Analisa Torres. This means that the SEC can now challenge the characterization of programmatic sales of XRP, which Judge Torres deemed not to be securities, before the Second Circuit. Furthermore, the SEC has petitioned the court to stay the proceedings of the jury trial for Ripple's cofounders, Brad Garlinghouse and Chris Larsen, previously scheduled by Judge Torres for Q2 2024.

And amidst the enforcement tides, Coinbase, the largest crypto exchange in the U.S., is making strides in a different direction. Despite its ongoing legal dispute with the SEC, the exchange has secured approval from the National Futures Association to introduce crypto futures to eligible U.S. customers. With the new license, Coinbase stands as the first U.S. crypto platform to offer regulated and leveraged crypto futures, in addition to traditional spot trading, as highlighted in its official announcement.

On a different front, Bittrex, a prominent crypto-asset trading platform based in Washington, has agreed to a settlement of $24M. The settlement stems from allegations by the SEC that Bittrex operated as an unregistered exchange, broker, and clearinghouse for securities sold as crypto assets.

Shifting gears to non-crypto enforcement news, Justice Elena Kagan of the U.S. Supreme Court temporarily halted the enforcement of a ruling by the Ninth Circuit Court of Appeals in the three-year legal dispute between Epic Games, the publisher of Fortnite, and tech giant Apple. The decision grants Apple the opportunity to appeal the ruling to the Supreme Court. Last April, the Ninth Circuit had found Apple in violation of California's Unfair Competition Law for not allowing iOS apps to present users with payment alternatives beyond the company's own in-app purchasing mechanisms, which impose a 30 percent fee on generated funds. While the Ninth Circuit ruled in favor of allowing developers to link to external sites, it also maintained Apple's right to enforce its 30 percent in-app purchase fee.

3. AI

The troubles facing Worldcoin all over the world are far from over. Following France, the UK, Germany, and Kenya, Argentina's government has recently initiated an inquiry into Worldcoin's biometric ID and wallet project, specifically focusing on its data collection practices within the country. The Public Information Access Agency, Argentina's data oversight body, sent a letter to the Worldcoin Foundation on August 7, seeking information on the company's efforts to safeguard the privacy of participating citizens. Once the investigation concludes, Argentina will have various options at its disposal, including the possibility of following Kenya's approach by imposing a comprehensive suspension of the project.

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See you next week!