As reported in more detail on our Regulatory Oversight blog, the Securities and Exchange Commission’s Division of Examinations recently released its 2024 Examination Priorities report. The report underscores the SEC’s intent to focus on risk areas impacting market participants, particularly those related to cryptocurrency and emerging technology.
On October 19, the Securities and Exchange Commission (SEC) dismissed its claims against Ripple Labs, Inc. (Ripple) executives Bradley Garlinghouse and Christian Larsen for allegedly aiding and abetting Ripple’s violations of the Securities Act with respect to its “institutional sales” of XRP. The Southern District of New York had deemed “institutional sales” to be unregistered securities in its July summary judgment decision, however, at that time the court reserved judgment as to the aiding and abetting claims against the executives. The matter was set for trial in 2024.
On September 8, the Financial Crimes Enforcement Network of the U.S. Department of Treasury (FinCEN) issued an alert warning financial institutions to be vigilant against a prominent virtual currency investment scam called “pig butchering.” U.S. law enforcement currently estimates victims in the United States have lost billions of dollars to these types of scams.
Yesterday, Coinbase Financial Markets, Inc., a leading cryptocurrency exchange, announced that it has secured regulatory approval from the National Futures Association (NFA) to operate a futures commission merchant offering crypto futures on its platforms. The NFA is the self-regulatory organization for the U.S. derivatives industry, designated by the Commodity Futures Trading Commission (CFTC). According to Coinbase, its application has been pending since 2021.
At a White House Roundtable on protecting Americans from allegedly harmful “data broker” practices, Consumer Financial Protection Bureau (CFPB or Bureau) Director Rohit Chopra announced the Bureau’s intention to expand the reach of the Fair Credit Reporting Act (FCRA) to data brokers. He stated, “Next month, the CFPB will publish an outline of proposals and alternatives under consideration for a proposed rule. We’ll soon hear from small businesses, which will help us craft the rule.”
On August 9, the Securities and Exchange Commission (SEC) sent a letter to U.S. District Judge Analisa Torres requesting leave to file an interlocutory appeal in SEC v. Ripple Labs, Inc. as to the two adverse liability determinations in her July 13, 2023 order. That order granted partial summary judgment in Ripple Labs’ favor regarding the sale of its XRP token. As we previously discussed here, the court held in deciding cross motions for summary judgment that defendants’ “programmatic” offers and sales to XRP buyers over crypto asset trading platforms and Ripple’s “other distributions” in exchange for labor and services did not involve the offer or sale of securities under the U.S. Supreme Court’s decision in SEC v. W.J. Howey Co.
On August 8, the Federal Reserve Board (Fed) issued a press release providing additional information on its Novel Activities Supervision Program (Program) to monitor novel activities in the banks it oversees. Novel activities are defined to include: (1) technology-driven partnerships with non-banks to provide banking services to customers, and (2) activities involving crypto-assets and distributed ledger or “blockchain” technology. According to the Fed, “the Program will be risk-focused and complement existing supervisory processes, strengthening the oversight of novel activities conducted by supervised banking organizations.” The Fed will notify those banking organizations whose novel activities will be subject to examination in writing and will routinely monitor supervised banking organizations that are exploring novel activities.
In a long-awaited decision in SEC v. Ripple Labs, Inc., U.S. District Judge Analisa Torres of the Southern District of New York held that Ripple Labs, Inc.’s (Ripple) XRP token is not, in and of itself, a security requiring registration. Although the decision is being regarded by many as a victory for both Ripple and the crypto industry, the nuances in the decision may result in an appeal from both sides.
On July 12, U.S. Senators Cynthia Lummis (R-WY) and Kirsten Gillibrand (D-NY) reintroduced legislation, titled the Responsible Financial Innovation Act that would establish a comprehensive regulatory framework for crypto assets. This proposed bill expands on the bill the senators introduced in 2022 by adding new consumer protections and safeguards to further strengthen the industry against fraud and bad actors, among other additions.
On June 16, The Board of Governors of the Federal Reserve System (Federal Reserve) launched its Master Account and Services Database, providing a searchable database on which financial institutions have access to the Federal Reserve master accounts and financial services. A master account is an account in which a Federal Reserve bank receives deposits