In this issue:

U.S. Fintechs and Crypto Companies Announce Stablecoin Products

By Robert A. Musiala Jr.

A major U.S. payments and fintech company recently announced the launch of contactless stablecoin payments using its Tap to Pay software development kit. According to a company blog post, the newly launched product allows users to tap their cellphones to make contactless merchant payments from crypto wallet apps on their phones.

In more stablecoin news, a major U.S. crypto exchange recently announced the forthcoming launch of its Custom Stablecoins product. According to a company blog post, the product will allow any business to create a custom stablecoin fully backed 1-to-1 by “flexible collateral,” including USDC, with the collateral custodied by the exchange.

Stablecoin infrastructure provider zerohash recently announced that it has received its Electronic Money Institution (EMI) license from the Dutch central bank. According to a company blog post, the EMI license “further buttresses zerohash’s leading global regulatory posture and provides certainty in respect of all activities that zerohash Europe powers for its financial institution and enterprise clients in the European Economic Area.”

Finally, Anchorage Digital and Grupo Salinas recently announced “a partnership to modernize cross-border settlement through the use of federally issued stablecoins.” According to a press release, “[a]t the center of the collaboration is Anchorage Digital’s newly launched Stablecoin Solutions for Banks, a purpose-built offering enabling international financial institutions to access secure, compliant U.S. dollar settlement using stablecoin rails.”

For more information, please refer to the following links:

Major U.S. Financial Services Companies Receive NY BitLicenses

By Robert A. Musiala Jr.

A major U.S. financial services company and one of the largest payment card network providers in the world recently announced that it has been granted a BitLicense by the New York State Department of Financial Services. According to a press release, “[t]he BitLicense approval aligns with [the company’s] long‑term strategy to responsibly engage with evolving payment and settlement infrastructure supporting digital currencies such as stablecoins and tokenized deposits, while maintaining and building upon the same standards that underpin its global payments network.”

Another major U.S. financial services and digital assets firm also recently announced that it has been granted a BitLicense. In a press release announcing the license, the company’s CEO said, “New York is home to the deepest pool of institutional capital in the country, and digital assets are no longer sitting at the edge of those allocations.”

For more information, please refer to the following links:

U.S. Financial Firms Launch Crypto Index Futures, Tokenized Money Market Fund

By Robert A. Musiala Jr.

A major global derivatives marketplace recently announced plans to launch a Nasdaq CME Crypto Index futures product on June 8, pending regulatory review. According to a press release, these futures “will be the company’s first-ever market-cap weighted futures contract, and available to trade in both micro-sized and larger-sized contracts.” The release further notes that the “contracts will provide market participants with a capital-efficient way to gain exposure to the top cryptocurrencies by market cap – all through a single, financially settled futures contract.”

In other news, a major U.S. bank recently announced “the launch of its second tokenized money market fund available to U.S. investors … available on the public Ethereum blockchain.” According to a press release, the fund is available to qualified investors and is a U.S.-registered government money market fund designed to invest in a manner to support stablecoin issuers under the GENIUS Act.

For more information, please refer to the following links:

U.S. Crypto and Traditional Financial Firms Announce Product Integrations

By Robert A. Musiala Jr.

A major U.S. financial market clearing, settlement and post-trade market infrastructure company recently announced a collaboration with Chainlink to leverage the Chainlink Runtime Environment (CRE) and Chainlink data standard to enable near-real-time collateral management across financial markets and blockchains. According to a press release, “[t]he integration of Chainlink’s CRE and data standard will allow [the company] to deliver a unified on-chain environment, bringing on-chain asset prices, valuations and other collateral agreement data.”

In another development, a major U.S. crypto exchange and a global investment manager recently announced “a strategic collaboration to bring traditional financial products onchain and expand their utility across digital asset markets.” According to a press release, “[t]he program pairs [the asset manager’s] global asset management and tokenization expertise with [the exchange’s] crypto-native trading, custody and onchain infrastructure.”

And in a final notable item, a major U.S. blockchain infrastructure provider recently announced that its global multi-asset prime brokerage platform has integrated with EDX Markets and EDXM International, a major institutional digital asset exchange. According to a company blog post, the integration “enables … clients to access EDX’s spot and perpetual futures liquidity for digital assets within a unified, capital-efficient prime brokerage framework.”

For more information, please refer to the following links:

Proposal Implements GENIUS Act AML/CFT Requirements for FDIC-Supervised PPSIs

By Om M. Kakani

On May 22, the board of the U.S. Federal Deposit Insurance Corp. (FDIC) approved a proposed rule to establish Bank Secrecy Act (BSA) and sanctions compliance standards for FDIC-supervised permitted payment stablecoin issuers (PPSIs). The proposal would implement certain requirements of the GENIUS Act, under which the FDIC is the primary federal regulator for PPSIs that are subsidiaries of insured state nonmember banks and state savings associations approved to issue payment stablecoins. The rule applies broadly to FDIC-supervised institutions and incorporates stablecoin activities into the existing supervisory framework for banking organizations.

Under the proposed rule, PPSIs would have to comply with applicable anti-money laundering/countering the financing of terrorism (AML/CFT) regulations; economic sanctions programs; and related reporting requirements, including rules issued by the U.S. Financial Crimes Enforcement Network (FinCEN) and the Office of Foreign Assets Control under 31 CFR Chapters V and X. A joint FinCEN and banking agency rulemaking would also require PPSIs to implement customer identification programs, while the FDIC proposal uses a principles-based approach tied to each PPSI’s business model and risk profile. The standards are intended to address operational, compliance and information technology risks while remaining consistent with existing legal requirements.

To implement the rule and integrate stablecoin issues into its supervisory and enforcement framework, the FDIC proposes amendments to Part 350 of the FDIC’s rules and regulations that would add BSA and sanctions compliance obligations for PPSIs and create a new subpart governing AML/CFT supervision and enforcement. The proposal also creates a detailed AML/CFT supervisory framework, defining terms such as “AML/CFT enforcement action” and “significant AML/CFT supervisory action” to include formal and informal measures such as cease-and-desist orders, consent orders, written agreements, memoranda of understanding and civil money penalties.

The FDIC states that a PPSI with an effective AML/CFT program generally would not face enforcement solely for complying with FinCEN program requirements unless there is a significant or systemic failure. The proposal also clarifies that these supervisory policies do not affect potential criminal liability under the BSA.

The proposal establishes a formal consultation process between the FDIC and FinCEN for significant enforcement and supervisory actions. Under this process, (1) the FDIC would give FinCEN advance notice, generally at least 30 days, before initiating certain actions; (2) FinCEN would have an opportunity to review and comment; and (3) the FDIC would consider FinCEN’s views, including on program effectiveness. The process is intended to improve coordination among federal agencies responsible for financial crimes compliance.

The proposal also addresses nonpublic supervisory information by allowing PPSIs to share relevant information with FinCEN in enforcement or supervisory matters, while outlining alternative approaches to preserve legal privileges and confidentiality protections. The FDIC will accept public comments on the proposed rule for 60 days after the date the proposal is published in the Federal Register.

For more information, please refer to the following links:

Executive Order Promotes Fintech Firm and Financial Institution Collaboration

By Keith R. Murphy

On May 19, the White House published an executive order (EO) titled Integrating Financial Technology Innovation into Regulatory Frameworks and a related fact sheet. The EO provides a technical definition of “Fintech firm” and states that fintech firms “provide innovative services and solutions that enhance access to financial products and services and create economic opportunity for all Americans.” To encourage this financial innovation, the EO provides that the government needs to update regulations to provide for the integration of digital assets and innovative technology into traditional financial services and payment systems. According to the EO, “[i]t is therefore the policy of the United States to streamline regulatory processes, reduce unnecessary barriers to entry, and encourage collaboration between fintech firms, federally regulated financial institutions, and Federal financial regulators.”

Among other directives, the EO requires that (1) within 90 days, “the head of each Federal financial regulator shall conduct a review of existing regulations, guidance, supervisory practices, and application processes to identify those that could be updated to facilitate innovation, and competition to financial products and services for fintech firms, particularly those that are small and emerging”; (2) within 180 days, “the head of each Federal financial regulator shall, in consultation with the Assistant to the President for Economic Policy, take steps to encourage innovation” as a result of the 90-day review; and (3) within 120 days, the U.S. central bank “is requested to conduct a comprehensive evaluation of the legal, regulatory, and policy framework governing access to [U.S. central bank] payment accounts and payment services by uninsured depository institutions and non-bank financial companies, including those engaged in digital assets and other novel financial activities (collectively, covered firms), and those functioning as direct participants in real-time (instant) payment networks,” and submit a report to the president setting forth its findings, options and any recommendations.

For more information, please refer to the following links: