The Monetary Authority of Singapore announced a new framework that seeks to ensure value stability for stablecoins regulated in Singapore.

By Simon Hawkins, Farhana Sharmeen, Tan Gen Huong, and Adrian Fong

On 15 August 2023, the Monetary Authority of Singapore (MAS), Singapore’s primary regulator for banks and payment services, announced its new stablecoin regulatory framework. The new framework introduces licensing and other requirements for stablecoin issuers with operations in Singapore.

This framework follows a consultation paper in October 2022, on the MAS’ proposed approach to the regulation of stablecoin issuers and intermediaries, and a consultation paper on the scope of e-money and digital payment tokens in December 2019, in which the MAS considered the need to review its regulatory approach to accommodate stablecoins with the potential to become more widely used as payment instruments. These publications, together with the Hong Kong Monetary Authority’s discussion paper on its proposed approach to the regulation of stablecoins, (see Latham’s blog post), indicate that Asian regulators continue to consider appropriate guardrails for cryptocurrencies in light of significant consumer interest.

The Act aims to modernize and streamline state regulation of money transmitters while promoting innovation and consumer protection.

By Parag Patel, Mik Bushinski, and Deric Behar

More than a dozen US states have enacted the Money Transmission Modernization Act (MTMA) in whole or in part, while several others have introduced bills to implement some or all of the model legislation that seeks to establish a uniform set of regulatory standards applicable to money transmitters at the state level.

The Conference of State Bank Supervisors (CSBS), a trade association of state financial services regulators that regulate money transmitters (among other providers of financial services), finalized the MTMA in August 2021 after receiving feedback from industry stakeholders.

The MTMA aims to reduce regulatory burden for money transmitters that operate in many states, streamline regulatory efforts and coordination among state regulators of money transmitters, encourage innovation by money transmitters, and protect small businesses and consumers that rely on money transmitters. The potential impact from more uniform and streamlined licensing across states is significant: in 2021, money transmitters handled $4.9 trillion, of which 99.8% was transmitted by companies licensed in multiple states, according to the CSBS.

New laws implement regulatory standards and licensing requirements for fintechs seeking to improve employee access to wages.

By Parag Patel, Mik Bushinski, and Deric Behar

On June 13, 2023, Nevada enacted a law that regulates earned wage access (EWA) services provided to state residents. Missouri followed by enacting an EWA law on July 7, 2023 that shares many similarities with Nevada’s. The new EWA laws make Nevada and Missouri the first two states in the US to establish statutory frameworks designed to regulate EWA services.

EWA services enable a consumer to receive earned employment income prior to a scheduled payday. They ideally provide an alternative to high-cost forms of credit, such as payday loans, although some consumer advocacy groups have warned of fees and other problematic aspects with certain EWA services.

To date, the principal providers of EWA services are fintechs, some of which are new entrants and some of which have been in the EWA business for several years.

Importantly, the EWA laws in both states exempt EWA services from their respective state laws that regulate loans and money transmission. EWA service providers in Nevada or Missouri would therefore not be regulated as a lender or money transmitter in connection with the EWA services they provide to residents of those states.

In its February 2023 discussion paper (DP23/2) relating to the UK regulatory regime for asset management, the UK’s Financial Conduct Authority (“FCA”) briefly touched on fund tokenisation as an area of technological drive and change in the fund management industry. Please refer here to our update on that discussion paper.

The FCA made clear that…

A new program addresses innovative banking activities such as bank-fintech partnerships and digital assets while reinforcing guardrails around stablecoin activity.

By Arthur S. Long, Parag Patel, Pia Naib, Ja Hyeon Park, and Deric Behar

On August 8, 2023, the Board of Governors of the Federal Reserve System (FRB) issued guidance to the banking organizations that it oversees regarding its supervision of novel activities. The guidance also provides information on the process that state banks can follow to engage in certain stablecoin activities.

On July 12, 2023,  U.S. Senators Cynthia Lummis (R-WY) and Kirsten Gillibrand (D-N.Y.) proposed a revised version of their previously introduced crypto regulation bill to create better safeguards for the crypto industry generally while adding new, stronger consumer protection provisions and AML provisions.  The Lummis-Gillibrand bill, also known as the Responsible Financial Innovation Act (“RFIA”), identifies the need for enhanced regulation of digital assets.  The proposal addresses this need, in part, by creating clearly defined regulatory roles for the Securities and Exchange Commission (“SEC”) and the Commodity Futures Trading Commission (“CFTC”), which are two of the leading regulatory bodies currently engaged in regulating the U.S. crypto market, as well as creating a new Customer Protection and Market Integrity Authority self-regulatory organization.  The need for greater clarity in the roles of the CFTC and the SEC and with respect to cryptocurrency regulations generally is certainly timely, given the recent CFTC actions against Blockratize, bZeroX (and its successor Ooki DAO), and others and recent high-profile SEC actions against major crypto exchanges.

As reported in a Hunton Client Alert, the US Department of Justice, the US Department of Commerce’s Bureau of Industry and Security, and the US Department of the Treasury’s Office of Foreign Assets Control recently issued guidance regarding the voluntary self-disclosure by US businesses of violations of US sanctions and export control laws to these agencies.…

Cash method taxpayers that stake cryptocurrency native to a proof-of-stake blockchain and receive additional units of cryptocurrency as rewards when validation occurs must include the fair market value of the rewards in income in the year in which the taxpayer gains dominion and control of the rewards, according to the IRS.  Revenue Ruling 2023-14 (the…

It is not unusual for users of a platform or of software to challenge the enforceability of a company’s terms of use if they take issue with the company’s product or service and decide to bring suit. As most terms of use contain an arbitration clause (or mandated dispute resolution process) and disclaimers of liability, the questions of user assent to and the overall enforceability of the terms of use become central issues early on in litigation. In each case, judges adjudicating legal challenges to site terms generally examine the circumstances behind the online contracting process closely – scrutinizing the user interface, the presentation of the terms and the reasonableness of the relevant provisions governing the transactions or online accounts at issue. In some instances, courts have ruled that online terms were unenforceable for a variety of reasons, often owing to the non-conspicuous presentation of the terms or that the terms themselves were in some way unconscionable or otherwise unenforceable. In one recent case, however, a federal judge in Georgia rejected a challenge brought by users of cryptocurrency exchange platform Coinbase Global, Inc. (“Coinbase”) and found Coinbase’s terms enforceable. (Kattula v. Coinbase Global, Inc., No. 22-3250 (N.D. Ga. July 6, 2023)).