Financial Services Blog

Showing 15 posts by Joshua S. Rosenblatt.

2017 Shaping Up to be a Busy Year for State-Level Blockchain Legislation

The first states to officially begin regulating blockchain technology and business did so in 2014, when a guidance document[1] from the Texas Department of Banking excluding blockchain activity from the state’s money transmitter laws kicked off a chain of similar opinions in other jurisdictions. Since then, at least 26 states—ranging from Alaska to West Virginia—have either introduced or enacted legislation regulating blockchain in some manner. The past seven months have seen the marked growth of legislative activity in the blockchain space, and at least sixteen bills have been enacted or proposed so far this year.[2]

[1] Texas Department of Banking, Supervisory Memorandum 1037, Regulatory Treatment of Virtual Currencies Under the Texas Money Services Act (April 3, 2014), available at http://www.dob.texas.gov/public/uploads/files/consumer-information/sm1037.pdf.

[2] As of July 27, 2017. Read More ›

Launching an ICO? Follow This Advice from the SEC

Lost in the headlines over the SEC’s recent pronouncements on cryptocurrency was important practical advice for both promoters of and participants in initial coin offerings (ICOs). Read More ›

FinCEN Cracks-Down on Yet Another Alleged Illegitimate Virtual Currency Exchange, Raising More Concerns for Legitimate Exchanges

The Financial Crimes Enforcement Network (FinCEN) takes first action against a foreign-located money service business

 A bad week for exchanges keeps getting worse. Read More ›

SEC Addresses ICO Bubble, But Leaves Key Questions Unanswered

Yesterday’s flurry of releases from the U.S. Securities and Exchange Commission leaves open the question of whether any individual initial coin offering (ICO) represents the sale of securities under applicable U.S. law. Read More ›

Initial Coin Offering Risk Factors: More Than Just Legalese

This article was originally published on July 7, 2017 in Bitcoin Magazine, a subsidiary of BTC Media, LLC.

Initial Coin Offerings (ICOs) are where cryptographic computing and federal securities laws collide. As investors lacking the technical expertise of early market entrants throw their money into cryptocurrency presales, regulatory agencies like the U.S. Securities and Exchange Commission cannot be expected to sit on the sidelines much longer. Read More ›

A Cautionary Tale for Money Service Businesses: How Violating the Bank Secrecy Act Could Cost Millions

On February 27, 2017, The Financial Crimes Enforcement Network (“FinCEN”) fined Merchants Bank of California (“Merchants”) $7 million for what it called “egregious” violations of the Bank Secrecy Act (“BSA”). The Office of the Comptroller of the Currency simultaneously assessed a $1 million civil monetary penalty against Merchants because it violated two previous consent orders. Merchants is a community bank located in Carson City, California. The Bank had a large portfolio of Money Service Businesses (“MSBs”) customers. MSBs are generally recognized by federal regulators to include: (1) currency dealers or exchangers; (2) check cashers; (3) issuers of traveler’s checks, money orders, or stored value; (4) sellers or redeemers of traveler’s checks, money orders, or stored value; and (5) money transmitters. In Merchants’ case, it had 165 check-cashing and 44 money-transmitter customers, who often operated at great distances from the Bank. Compounding the situation was the fact that Bank insiders owned or managed a number of the MSB customers. Read More ›

New Hampshire Takes Steps to Exempt Virtual Currency Transfers from Its Licensing Regime

New Hampshire legislators may exempt people who provide money transfer services for virtual currency, such as bitcoin, from being considered “money transmitters” for the purposes of the state’s licensing requirements. Specifically, the bill, HB436, would amend the definitions section (RSA 399-G:1) and the exemptions (RSA 399-G:3).  As modified, the definitions would clearly define what a “virtual currency” is.  The amended version would also create a new licensing exemption for “[p]ersons conducting business using transactions conducted in whole or in part in virtual currency.” Read More ›

The Medieval Economics of Cryptocurrency

Medieval kings have something in common with cutting-edge software developers forking new applications off the blockchain. Read More ›

It’s EZ as 1, 2, 3 . . . Disclosure, limited liability and periodic statements required for prepaid accounts under the CFPB’s new Prepaid Rule amending Regulations E and Z

The Consumer Financial Protection Bureau (CFPB) recently issued a final rule, the “Prepaid Rule,” amending Regulations E and Z. The Prepaid Rule affects issuers of prepaid personal, household or family accounts by expanding the applicability of Regulations E and Z as of October 1, 2017. It brings “prepaid accounts” into Regulation E’s definition of “account” and broadens the reach of Regulation Z’s overdraft credit features. While this rule applies to digital wallets and P2P payments, the CFPB did not extend this rule to virtual currency. Read More ›

Considerations For A Legislative Definition of “Blockchain”

It seems like everyone is discussing “blockchain,” but few have taken the time to really define what blockchain is (and is not). In particular, the federal government has not reached a consensus on what the term should mean. Recently a group of blockchain experts from academia, private practice, and government relations sat down together to do just that—define “blockchain” – at the Blockchain Definition on Capitol Hill event, hosted by MIT Media Lab, Congressman David Schweikert, the Chamber of Digital Commerce, and the DC Blockchain Center.   This article shares one definition which was submitted for consideration at the event.  Read More ›

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Attorney Spotlight

Christopher C. Tieke is an associate in Frost Brown Todd's Louisville office, focusing his practice on business litigation. He graduated from the University of Cincinnati College of Law, with magna cum laude honors; served as an Associate Member of the University of Cincinnati Law Review; and participated in the Entrepreneurship and Community Development Clinic.

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