The rapid development of AI is introducing new opportunities and challenges to dispute resolution. AI is already impacting the document review and production process, legal research, and the drafting of court submissions. It is expected that the use of AI will expand into other areas, including predicting case outcomes and adjudicating disputes. However, the use
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Quantum Computing and the Financial Sector: World Economic Forum Lays Out Roadmap Towards Quantum Security
Quantum technology is seen as having the potential to revolutionize many aspects of technology, the economy and society, including the financial sector. At the same time, this technology represents a significant threat to cybersecurity, especially due to its potential to render most current encryption schemes obsolete.
With a view to meeting these challenges, the World…
English Court of Appeal: Cryptoasset Network Software Developers May Owe Fiduciary Duties to Token Holders
On 3 February 2023, the Court of Appeal of England and Wales, Civil Division (the “Court”) handed down judgment in the litigation between Tulip Trading Limited (“TTL”) and a number of core developers of software in respect of four bitcoin networks.
The Court found that it was properly arguable that software developers may owe fiduciary…
FDIC Continues Rulemakings Related to Misrepresentation in Advertising: Digital Asset Businesses Still in the Crosshairs
On December 21, 2022, the Federal Deposit Insurance Corporation published a notice of proposed rulemaking elaborating on what constitutes false advertising of deposit insurance for purposes of the Federal Deposit Insurance Act.
The Proposal would modernize rules on using the FDIC’s official sign and insured depository institutions’ advertising statements, as well as clarify regulations regarding…
FDIC Issues Cease and Desist Letters to Companies for Crypto-Related Representations About Deposit Insurance
The last few weeks have seen a significant ramp-up of federal bank regulators’ focus on cryptocurrency companies and their disclosures regarding FDIC deposit insurance, signaling a potential spike in enforcement actions targeted at the crypto sector.
On August 19, 2022, the Federal Deposit Insurance Corporation (“FDIC”) issued cease and desist letters (the “Letters”) to five…
DFS Enters Consent Order with Robinhood Crypto for Deficiencies in AML, Cybersecurity, and Virtual Currency Compliance
On August 1, 2022, Robinhood Crypto LLC (“RHC”) entered into a Consent Order with the New York Department of Financial Services (“DFS”) based on “serious deficiencies” related to anti-money laundering (“AML”), cybersecurity, and virtual currency that were identified in DFS’s examination of RHC covering the period from January to September 2019.[1] RHC is…
UCC Digital Asset Amendments Finalized
This month, the sponsors of the Uniform Commercial Code (“UCC”) approved wide-ranging amendments to the UCC (the “2022 UCC Amendments”)[1] to provide workable rules for emerging technologies, such as distributed ledger technology and virtual currency.
If adopted by individual state legislatures, these amendments should provide greater certainty regarding the rules governing security interests, competing…
OFAC Ramps up Targeting of Ransomware-linked Actors and FinCEN Updates Ransomware Advisory
On November 8, 2021, the U.S. Department of the Treasury, Office of Foreign Assets Control (OFAC) designated a virtual currency exchange, Chatex, and its infrastructure support providers on the list of Specially Designated Nationals and Blocked Persons (SDN List) for their role in facilitating financial transactions for ransomware actors.[i] The Financial Crimes Enforcement Network…
OFAC Issues Sanctions Guidance to Virtual Currency Industry
On October 15, 2021, the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) issued “Sanctions Compliance Guidance for the Virtual Currency Industry” (the “Guidance”). The Guidance follows recent guidance and advisory letters directed to the virtual currency industry relating to the risk of facilitating ransomware payments[1] and is OFAC’s…
OFAC Updates Ransomware Advisory and Sanctions Virtual Currency Exchange
On September 21, 2021, the U.S. Department of the Treasury, Office of Foreign Assets Control (OFAC): (i) issued an updated advisory on potential sanctions risks for facilitating ransomware payments; and (ii) designated SUEX OTC, S.R.O. (SUEX), a virtual currency exchange, on the list of Specially Designated Nationals and Blocked Persons (SDN List) for its role…
SEC Enforcement Action Against Poloniex Signals Heightened Scrutiny for Crypto Exchanges
On August 9, 2021, the SEC issued a cease-and-desist order against digital asset exchange Poloniex, Inc. for allegedly operating an unregistered exchange in violation of Section 5 of the Exchange Act in connection with its operation of a trading platform that facilitated the buying and selling of digital asset securities.[1]
In the cease-and-desist order,…
Cryptocurrency and Other New Forms of Financial Technology: Potential Terrorist Financing Concerns and Liability
While large financial institutions have traditionally been hesitant to enter new areas of financial products, particularly virtual assets, many more banks and companies have expressed interest in virtual currencies as cryptocurrency has become increasingly mainstream. Given the use of such services by terrorist groups, it is important for banks and other financial institutions to consider…
OFAC Settles with Digital Currency Payment Processor for Sanctions Violations
On February 18, 2021, the U.S. Department of the Treasury, Office of Foreign Assets Control (OFAC) announced a $507,375 settlement with BitPay, Inc. (BitPay), a payment processor for merchants accepting digital currency as payment for goods and services, for 2,102 apparent violations of multiple sanctions programs between 2013 and 2018.[1] The settlement highlights that…
Turning the Page: Highlights of the SEC’s Division of Examination’s 2021 Priorities
On March 3, 2021, the U.S. Securities and Exchange Commission (“SEC”) Division of Examinations (the “Division”)—formerly the Office of Compliance Inspections and Examinations—released its 2021 Examination Priorities (“2021 Priorities”). The 2021 Priorities generally retain perennial risk areas as the Division’s core focus, but do include several new and emerging risk areas reflecting broader policy shifts…
FDIC Overhauls Brokered Deposit Regulation
In December 2020, the FDIC approved a Final Rule to reframe the definition and exceptions for “brokered deposits”. Historically, the FDIC has broadly defined virtually any third party connecting a depositor with a bank as a “deposit broker” and the resulting deposits as “brokered deposits”. The Final Rule responds to long-standing industry criticisms seeking to…
OCC Affirms Authority of National Banks to Engage in Additional Cryptocurrency-Related Activities, Including Issuing Stablecoins
On January 4, 2020, the Office of the Comptroller of the Currency (“OCC”) published an interpretive letter (the “Letter”) clarifying that national banks and federal savings associations (“banks”) may engage in and facilitate payment activities through new technological means, including serving as a node in a distributed ledger system such as those utilized by some…