Fintech Update, 7/24 - 7/30
July 24-30, 2017
Leading Off
The SEC found that most Initial Coin Offerings are subject to regulation as securities; the OCC challenged the CSBS’s standing to bring a lawsuit challenging the OCC’s proposed “fintech charter”; financial services startup Varo announced it will seek to become an insured national bank; PayPal added another new partner in Chinese e-commerce giant Baidu; a GAO report knocked the SEC for deficiencies in its cybersecurity; and online investment firm Betterment raised $70 million in Series E funding.
In the News
SEC increases scrutiny of ICOs. The Securities and Exchange Commission (SEC) issued a finding that digital “shares” sold via Initial Coin Offerings (ICOs) are subject to regulation as securities. The SEC report [full text] concluded that “issuers of [DLT]-based securities must register offers and sales of such securities unless a valid exemption applies.”
OCC challenges CSBS lawsuit in court. The Office of the Comptroller of the Currency (OCC) requested a dismissal of the Conference of State Bank Supervisors’ (CSBS) lawsuit, filed in April, challenging the OCC’s proposed “fintech charter.” The OCC motion stated that the CSBS lacked standing for a federal suit because it has not shown that it has been harmed.
Varo seeks to become insured national bank. The digital financial services firm applied to the OCC and FDIC with the aim of offering the full suite of products available under an insured national bank charter. CEO Colin Walsh said that, if established, Varo Bank will help the firm “help Americans nationwide” better manage their money and reach their financial goals.
PayPal agrees to new partnership with Baidu. The payments firm added the Chinese e-commerce giant to its growing stable of international partners, after agreeing to deals with Apple and Samsung earlier in the month. The arrangement will allow Baidu’s 100 million mobile wallet users to make payments to PayPal’s 17 million merchants worldwide.
Overstock.com has been “waiting” for regulated ICOs. The retailer -- whose CEO, Patrick Byrne, is an outspoken proponent of blockchain -- says it is prepared for greater SEC scrutiny of tokenized securities. Overstock’s tØ platform is a licensed alternative trading system (ATS), which the company says will positioned it to facilitate tokenized securities exchanges going forward.
GAO tells SEC to bolster cyber defenses. A U.S. Government Accountability Office (GAO) report faulted the SEC for cybersecurity deficiencies, including improperly encrypting sensitive information and “missteps” in its firewall configuration. The report stated that the SEC’s data “will continue to be at unnecessary risk of compromise” until the deficiencies are corrected.
Card payments overtake cash in Australia. According to new data from the Australian central bank, “cards have overtaken cash as the primary method for consumer payments in Australia,” with 52% of payments occuring via card in 2016, compared to 37% via cash. The news is similar to a recent one from the U.K., suggesting a growing global move to card-based payments.
Betterment raises $70M. The financial services and robo-advisory firm raised $70 million in its Series E round, pushing the company up to an $800 million valuation. Betterment now manages “nearly $10 billion in assets for more than 270,000 customers,” up from $4 billion 15 months ago. CEO Jon Stein also said the firm is considering a possible IPO in the future.
What might the SEC’s ICO finding mean for cryptocurrencies? Reuters columnist Timur Onder argues that the “booming market” for ICOs “just got a reality check,” after the SEC’s finding that certain ICOs should comply with “registration, disclosure, and other requirements that apply to stock and bond issues.”
Have a great week!
The Fintech Update Team