A new proposal would subject financial institutions and exchanges to onerous recordkeeping and reporting requirements for certain digital currency transactions.

By Miles P. Jennings, Benjamin A. Naftalis, Eric S. Volkman, Margaret Allison Upshaw, and Deric Behar

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In a surprise release in the waning days of the Trump administration, the Financial Crimes Enforcement Network (FinCEN) division of the Department of the Treasury issued a proposed rule (the Proposal) that would impose significant new obligations on market participants in the cryptocurrency and digital asset market ( Requirements for Certain Transactions Involving Convertible Virtual Currency or Digital Assets). …


The no-action letter is the first to expressly permit token transfer off-platform to non-users and conversion to fiat currency by token holders.

By Stephen P. Wink, Shaun Musuka, and Deric Behar

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As crypto prices surge, we find ourselves in the midst of another crypto wave. Given the unrelenting flow of news that accompanies such periods, it may have been easy to miss that the SEC staff recently granted no-action relief to another Ethereum-based token, VCOIN.

In only its third no-action letter to date for digital tokens, the SEC cleared the way for the software development company IMVU, Inc. to sell VCOIN, an ERC-20 token, as a transferable non-security to its global platform users. In its incoming letter, IMVU stated that it operates “one of the largest online three-dimensional avatar-based social communities in the world” with “over 7 million monthly active users from more than 140 countries” and “a user-generated virtual goods catalog of more than 40 million items.” In the same letter, IMVU sought guidance from the SEC as to whether its offering of VCOIN would require registration under Section 5 of the Securities Act and Section 12(g) of the Exchange Act. …


The CFTC issues stringent guidelines for FCMs seeking to custody digital assets in connection with physically delivered futures contracts or swaps.

By Yvette D. Valdez, Adam Bruce Fovent, and Deric Behar

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The US Commodity Futures Trading Commission’s (CFTC’s) Division of Swap Dealer and Intermediary Oversight (DSIO) issued CFTC Staff Letter №20–34 (the Advisory) on October 21, 2020, clarifying its views on the acceptance, holding, and reporting of virtual currency (e.g., bitcoin or ether) in segregated accounts by futures commission merchants (FCMs) and the development of appropriate risk management programs in relation thereto.

Specifically, the Advisory relates to virtual currencies deposited by customers with FCMs in connection with physically delivered futures contracts or swaps. Due to the “custodian risk” associated with holding virtual currency as segregated funds, the Advisory lays out specific guidance for FCMs on virtual asset acceptance and custody, and their responsibility to implement appropriate policies, procedures, and oversight programs. The Advisory does not address virtual currency held by FCMs on behalf of customers trading derivatives on markets outside of the US, or virtual currency held by FCMs on their own behalf, including in a proprietary account. …


In setting forth its rationale, FINRA observed that private placement retail communications reviewed by AdReg have “revealed significant and pervasive” violations of FINRA Rule 2210.

By Dana G. Fleischman, Stephen P. Wink, Naim Culhaci, and Deric Behar

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On October 28, 2020, the Financial Industry Regulatory Authority, Inc. (FINRA) filed with the US Securities and Exchange Commission (SEC) proposed amendments (the Proposal) to FINRA Rules 5122 (Private Placements of Securities Issued by Members) and 5123 (Private Placements of Securities). …


By Alan W. Avery, Todd Beauchamp, Stephen P. Wink, Pia Naib, Loyal T. Horsley, Charles Weinstein, and Deric Behar

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On September 21, 2020, the US Office of the Comptroller of the Currency (OCC) issued Interpretive Letter #1172 (the Letter), giving national banks and federal savings associations (FSAs) the greenlight to hold deposits that serve as reserves for the underlying assets backing certain “stablecoins” on behalf of customers. According to the Letter, national banks and FSAs are granted this expanded authority to hold stablecoin reserves if all of the following conditions are met:

  • Deposits that constitute reserves for stablecoins are limited to stablecoin transactions involving hosted wallets. …


By Brett Carr, Charles Weinstein, and Deric Behar

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Consumers’ rights to access and use their personal financial information has been a key focus of innovators and regulators over the past decade.

The development of “open banking” fintech models has proliferated, as customers discover the value in allowing third-party financial service providers to access dispersed personal data through the use of either credential sharing and “screen scraping” or application programming interfaces (APIs), which allow systems and applications to communicate in a more prescribed way without credential sharing.

Historically, banks have monopolized access to customer account data. The bank-customer relationship has been a private one governed by one-sided terms and conditions, with the bank deciding how customer data is stored and accessed. …


A new Payments Charter could enable entities to engage in payments-related activities on a nationwide basis, rather than by state.

By Alan W. Avery, Todd Beauchamp, Pia Naib, Loyal T. Horsley, and Charles Weinstein

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The US Office of the Comptroller of the Currency’s (OCC) newly appointed Acting Comptroller, Brian P. Brooks, is already advancing the agency’s fintech-focused modernization initiatives and taking steps to fulfill his promise to support technological innovation in the banking industry. On June 25, 2020, while speaking on the American Bankers Association’s podcast, Brooks announced that the OCC will introduce a new Payments Charter 1.0 (Payments Charter) this fall that will serve as a federal alternative to obtaining state money transmitter licenses. That announcement came less than a month after the OCC issued an advance notice of proposed rulemaking (ANPR) requesting public comment regarding the OCC’s regulations relating to “digital activities” of national banks and federal savings associations (FSAs). The ANPR was issued in an effort to ensure that such regulations continue to evolve with industry developments. …


By Alan W. Avery, Todd Beauchamp, Yvette D. Valdez, Pia Naib, Loyal T. Horsley, Charles Weinstein, and Deric Behar

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On July 22, 2020, the US Office of the Comptroller of the Currency (OCC) issued Interpretive Letter #1170 (the Letter), giving national banks and federal savings associations (FSAs) the greenlight to provide customers with custody services for cryptocurrencies and digital assets that are not broadly used as currencies (collectively, cryptoassets). …


By Yvette D. Valdez, J. Ashley Weeks, and Deric Behar

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Earlier this year, the US Commodity Futures Trading Commission (CFTC) approved final interpretive guidance (Guidance) concerning retail commodity transactions involving certain digital assets. …


The three US federal banking agencies have taken steps to enable the financial system to continue functioning during the pandemic.

By Alan W. Avery and Pia Naib

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During the course of this week, the three US federal banking agencies — the Board of Governors of the Federal Reserve System (Federal Reserve), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) — have taken a series of actions intended to enable the US financial system to continue functioning in the midst of COVID-19 and to encourage banks to meet the financial services needs of their customers who are affected by the pandemic. …

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