US in Dire Need of Clear Rules on Crypto, Says Top Banking Regulator
Karsten Wenzlaff, Advisor
August 26th, 2025
Karsten Wenzlaff is a Crowdfunding and Fintech Expert from Germany. He is Secretary-General of Digit[...]
Category Archives: Cyber Security, Quantum, Hacks, Fraud Alerts, Risks, InsurTech
From Voting To Social Media: What Does The Future Hold For Digital Identity On The Blockchain
Forbes | Lawrence Wintermeyer | Oct 30, 2020
The CEO’s of America’s tech giants Twitter and Facebook were grilled by the Senate on the Hill this week putting social media and free speech in the spotlight. At the forefront of this debate are the rules governing the immunity from liability social media companies have which is created by section 230(c) of the Communications Decency Act in the U.S.
Section 230 means that users on social medial platforms can say whatever they wish and the social media companies are not liable for it, or the repercussions. I can think of no other sector or industry that enjoys this immunity – it appears a licence to print whatever drives user volumes to deliver advertising revenues with little consideration for the content or the identity and provenance of the individual who’s voice we are hearing.
See: House Lawmakers Condemn Big Tech’s ‘Monopoly Power’ and Urge Their Breakups
Now, most of us in the free world wish to protect our right to free speech, but only ten percent of Americans think social media are beneficial with two-thirds believing they cause harm.
This is not surprising with reports of fake news, foreign actors manipulating news and communities, the rise of identify politics and hate speech, and social media companies themselves accused of misusing our private data.
The global financial system is held to account when it comes to identity, a process that is know as Know Your Customer or KYC. To open up a bank account, you need to provide proof of who you really are. Though the KYC process can be a bit clunky, it can be done online and efficiently these days and must be a serious consideration for policy makers when it comes to social media or postal voting (which should be done from your phone).
One of the biggest emerging use cases for blockchain is in the realm of decentralized digital identity, wherein governments and enterprises collect, verify and manage citizens’ personal data on-chain. The aim is to replace the legacy of various storage systems and databases governed by unwieldy and often insecure centralized authorities and agencies.
See: Do Central Bank Digital Currencies need a blockchain operating system?
Given the sensitivity of such data, a blockchain-based identity system has its strengths with features such as hashing functions, digital signatures, and zero-knowledge proofs protecting our information against theft or loss.
In the context of elections, these properties of blockchain offer several other attractive possibilities. Digital signatures are completely secure, acting as a timestamped confirmation that a vote has been cast. This confirmation can be viewed transparently on the blockchain, with the zero-knowledge proof acting as evidence that the vote was cast without identifying the individual. The vote itself is an immutable record - it cannot be changed after the fact.
In the context of COVID-19, the pandemic necessitated the distribution of emergency funds to citizens, which were partly calculated based on the taxes they’ve paid. A single, blockchain-based identity record could overcome these challenges by providing a single point of truth for government departments.
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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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How AI is impacting customer experience in fintech
VentureBeat | VB Staff | Oct 29, 2020
“The democratization of AI technology means that it’s no longer confined to the university lab or the big corporate R&D lab, but available to individual developers and startups that can get going on this journey very easily and quickly,” says Dr. Steve Flinter, VP of artificial intelligence and machine learning, Mastercard Lab.
This is particularly relevant for the fintech world, where AI is offering increasingly sophisticated solutions in four specific areas: security, customer experience, new interfaces, and general internal process improvement. All these issues tie back to customer service.
See: Top 12 AI Use Cases: Artificial Intelligence in FinTech
“AI is available 24/7, it keeps learning, and it spots opportunities for efficiency — often before you even know you have a problem,” says Dr. Daniela Braga, founder and CEO at DefinedCrowd. “Banking is all about knowing how the future is going to play out. The data for these kinds of predictions is a playground for AI.”
In the financial world, AI is already solving problems such as partial replacement of call center agents, automation of back office tasks, and behavioral analytics.
Because your customer’s safety is paramount, AI can be used to deliver a better customer experience. AI and machine learning can detect who you are based on your behavior. When you identify yourself on a device or log in to a merchant’s website, even if your password is compromised, your identity can be verified. On the other hand, an intruder can be identified because they use their device differently.
See: 7 Things You Need To Know Before Investing in Artificial Intelligence
“When you’re automating call centers, inserting a digital assistant into the first line of customer care means you can answer 100% of calls versus missing 20 to 50%, which is the current state of care in a lot of services — and deliver much better customer experience,” Braga says.
Additionally, inclusivity and building an AI that serves everyone is of utmost importance, Saavedra Kochalski says. Capital One’s focus is on personalization to the point where they can understand who the customer is and what their needs are, anticipating and predicting what that customer might need, so that they have better outcomes in the future.
They use the many ways customers speak and express themselves to improve how their digital assistant, Eno, answers a question, but also to improve their other digital experiences as well.
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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Someone Just Sent $1 Billion in Bitcoin, Paid Only $3 in Fees
Decrypt | Jeff Benson | Oct 26, 2020
In back-to-back transactions this morning, 45,671 Bitcoin ($602 million) and 43,185 Bitcoin ($570 million) left a Xapo account to other wallets.
That's over $1.1 billion in Bitcoin, and all for a total transaction fee of $3.54.
See: Bitcoin price hits record high for 2020 after PayPal finally adds cryptocurrency
Though the same account sent the funds, they went to two different unknown addresses.
“There are multiple reasons for large crypto transfers like this: the most obvious one is that Xapo is moving funds to cold storage for safekeeping," MyEtherWallet CEO Kosala Hemachandra told Decrypt.
It's not unusual for Xapo wallets to send large chunks of Bitcoin, just usually not this big. In the past week, 4,000 BTC and 1,000 BTC amount have left Xapo wallets, for instance. But the size of these transactions dwarfs that.
Regardless of the reason, the same transaction would be infeasible at a bank, at least for an individual. While an automated clearing house (ACH) transfer, which takes days to clear, would be free at most banks, customers would face daily and/or monthly limits.
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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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You should be optimizing your cloud operations right now: Here’s how
TechRepublic | Scott Matteson | Oct 6, 2020
In my capacity as a system administrator, I've definitely seen the benefits of cloud services which my organization implemented before the pandemic.
Not only do we rely on Microsoft 365 apps, we are safely and securely able to use local applications such as Microsoft Teams, which connect to cloud-based servers even while off the VPN. Two-factor authentication using tokens and certificates is a key enabler to this functionality. Also, according to this article, the company also could use VPN routers and don’t worry about turned on the VPN connection or not, a special router will do it.
Efficient cloud operations wouldn't necessarily have saved all of the businesses that went broke, but they can indeed assist surviving companies where it counts.
See: Hey bank, get onto my cloud!
I talked with Josh Quint, senior director of cloud solutions provider ServerCentral Turing Group, a cloud and disaster recovery company, to learn more.
Scott Matteson: How long do you recommend backups of data be retained?
Josh Quint: We recommend maintaining a synthetic full backup plus six days forward incremental backups in a performance storage tier and maintaining a full backup for a rolling 28 days on a capacity storage tier. This provides two critical benefits:
- Companies will have the most-needed data readily available in case of an immediate need for a restore request.
- This will lower the total costs of the backup services by aging out older data to the capacity storage tier where they remain available, albeit with a bit more lead time required to restore.
Quint also believes compliance is a key element in off-site operations and gives his recommendations for auditing mechanisms and gap analysis methodologies:
The most important aspect of audits and gap analysis is to use anything and everything you have at your disposal and be sure you actually do it. Pay attention to invoices, watch services in use, note service performance, etc. You can buy one of a thousand different tools to give you information and insights here--even those that will proactively take scripted actions for you. However, if you don't act on the insights or don't have a process to intelligently use the insights to improve your processes--and validate the automated suggestions taking place --it won't matter what you use.
See: Compliance, clients to drive new tech
Quint also believes there are many examples of formal governance and security processes related to cloud operations for best efficiencies. They include being sure encryption is in place for all data and ensuring that backup strategies are in line with your compliance requirements so that gaps in data and expectations of data do not exist.
Scott Matteson: Do you have any examples of the daily use of cloud automation processes and services that companies should focus on?
Josh Quint: Four key areas where cloud automation processes can prove extremely valuable are:
- Automated data replication between different geographic sites
- Scaling up applications during peak business hours
- Shutting down or scaling back dev environments when not in use
- Routing application endpoints through cloud-based WAF for automated security
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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Department of Justice Publishes Cryptocurrency Enforcement Framework: “We see criminals using cryptocurrency to try to prevent us from following the money”
Crowdfund Insider | | Oct 8, 2020
Attorney General William P. Barr announced today the publication of the “Cryptocurrency: An Enforcement Framework.” The publication was created by Barr’s Cyber-Digital Task Force. The document outlines the Department of Justice’s approach to crypto and its challenges. The Framework states:
“… despite its relatively brief existence, this technology already plays a role in many of the most significant criminal and national security threats our nation faces. As the Task Force has found, illicit uses of cryptocurrency typically fall into three categories:
(1) financial transactions associated with the commission of crimes;
(2)money laundering and the shielding of legitimate activity from tax, reporting, or other legal requirements; or
(3) crimes, such as theft, directly implicating the cryptocurrency marketplace itself.
Task Force member John C. Demers, Assistant Attorney General for the National Security Division explained that they will adapt their strategy and tools to 21st-century financing, including to combat the use of cryptocurrencies to evade enforcement and harm our national security.
See:
New York to relax cryptocurrency rules
The case against BitMEX is a compass pointing towards the future of crypto regulation
A New Bill Proposes to Put US Crypto Exchanges Under a National Framework
New York to relax cryptocurrency rules
Specific issues mentioned in the Framework include crimes like pump-and-dump schemes, terrorist financing, malicious cyber activity, and money laundering.
“the ongoing challenges the government faces in cryptocurrency enforcement—particularly with respect to business models (employed by certain cryptocurrency exchanges, platforms, kiosks, and casinos), and to activity (like “mixing” and “tumbling,” “chain hopping,” and certain instances of jurisdictional arbitrage) that may facilitate criminal activity.”
The Framework notes that the digital infrastructure of the blockchain “almost always transcends territorial boundaries” and some of the largest cryptoasset exchanges operate outside of the United States making enforcement challenging.
Throwing down the gauntlet, the DOJ outlines its intent:
“As this Enforcement Framework makes clear, the challenges are significant. But so, too, are the resources that the U.S. Department of Justice, as well as the U.S. government as whole, are dedicating to the effort, in collaboration with our international partners.”
Attorney General Barr issued the following comment on the Framework:
Download here
“Cryptocurrency is a technology that could fundamentally transform how human beings interact, and how we organize society. Ensuring that use of this technology is safe, and does not imperil our public safety or our national security, is vitally important to America and its allies. I am grateful to the Cyber-Digital Task Force for producing this detailed report, which provides a cohesive, first-of-its kind framework for those seeking to understand federal enforcement priorities in this growing space.”
View original release: here
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Download The Cryptocurrency Enforcement Framework (83 pg PDF)--> here
View Other Fintech Reports and Research --> here
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Sibos 2020: Rethinking compliance for friction-free payments
Finextra | Oct 6, 2020
A handful of topical areas were canvassed in the ‘Friction or fiction: compliance in a real-time world’ panel session on day one of Sibos 2020’s virtual event. While there has been significant innovation in domestic and global payments, financial institutions still play a critical role in the global payment process.
To support real-time payments there is still much to be done in the way of continued application of innovation, compliance and operations. There is also a significant need for financial institutions to continue to engage with their regulators to discuss innovation in compliance, and the sector is undoubtedly well placed to collaborate on any such changes or improvements.
See: RegTech: The Financial Industry Disruptor
Erin Zavalkoff, global head of AML compliance risk management for foreign correspondent banking, Citi, provides her perspective on the subject in light of correspondent banking and the challenges presented across this sector.
“I think the biggest challenges is that the fintechs are very tech driven and client focused and may not be as appreciative at least at the outset of the regulatory constraints as banks. This makes fintechs ripe for training, and banks well placed to assist them in coming to appreciate their regulatory obligations.
Noting that these challenges have existed in correspondent banking for quite some time, moderator Ron Giammarco, partner, financial crime compliance, innovation, technology and operations, EY, questions whether it is therefore fair to say that while there has been plenty of innovation in payments, there hasn’t necessarily been a great deal of disruption.
Jeremy Warren, MD financial crimes compliance CIB, JPMorgan, adds that banks are increasingly seeing a need for partnerships and acquisitions which allow banks to deliver offerings provided very well by fintechs.
“Banks aren’t able to build as quickly or execute as efficiently so there are opportunities to buy or partner in these spaces. For instance, due diligence related to the onboarding of a client typically goes hand in hand with partnerships and acquisitions.
See: FinCEN Files: All you need to know about the documents leak
Zavalkoff adds that the success or failure of such exercises really depend on how the regulation can be altered to allow for such innovation, namely, easing restrictions on the sharing of KYC information between banks.
“But if the objective is to prevent financial crime then that can only be achieved through these greater partnerships and by lessening the burden on banks to do the more rote technical compliance and allowing more compliance resources to be put to work toward projects that may actually detect financial crime before it occurs.”
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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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The case against BitMEX is a compass pointing towards the future of crypto regulation
Cointelegraph | Shiraz Jagati | Oct 6, 2020
The CFTC and DOJ actions against BitMEX suggest that the crypto industry still has a lot of work ahead to meet KYC/AML standards.
Recent years have seen the crypto industry mature across the global economic landscape, but it still runs into high-profile snags. On Oct. 1, the United States Department of Justice filed criminal charges against four executives of the BitMEX trading platform — including its founder, Arthur Hayes — for violating the Bank Secrecy Act. One of the executives in question has been arrested, according to a DOJ statement.
See: How blockchain regulations will change in 2020
Furthermore, the Commodity Futures Trading Commission also filed a civil enforcement action against BitMEX and three of its executives for violating Anti-Money Laundering regulations.
The regulatory body claimed that BitMEX and its top brass have been engaging in shady activities for years, such as using weak Anti-Money Laundering and Know Your Customer policies that bad actors can exploit using various methods such as VPNs to mask their virtual identities, among others.
“BitMEX has been under investigation by the CFTC since early 2019 for allowing Americans to trade on the platform, and they were given time to improve their Customer Identification Program to effectively exclude US persons. It’s not that law enforcement hasn’t been following and warning BitMEX, but that BitMEX’s ongoing negligence and lack of compliance led to the hammer finally coming down on them.” John Jefferies, chief financial analyst at CipherTrace
Additionally, BitMEX makes use of a complex international corporate structure that includes a number of separate individual entities, and as a result, it’s not entirely clear where exactly the firm is based. Also, it’s worth noting that BitMEX openly promotes on its website that it’s registered in the Seychelles and has offices in premier destinations such as Hong Kong and New York.
See: City watchdog bans sale of risky cryptocurrency-linked products to protect retail investors against shock losses
“If BitMEX is found to have been operating unlawfully, in addition to the fines and penalties, the CTFC will also seek to ‘disgorge’ or recoup all of the profits generated by the exchange. This is consistent with the general idea that ‘wrongdoers’ should not profit from their unlawful activity.” Dean Steinbeck, chief operating officer of Horizen Labs
Regulatory action could be a game-changer for crypto industry
The allegations against BitMEX are serious and make a compelling case for decentralization. For its proponents, one of the more favorable attributes of decentralization is that no single entity or individual is in charge of the protocol because it’s run by its users through decentralized governance.
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Decrypt | Robert Stevens | Oct 6, 2020
US in Dire Need of Clear Rules on Crypto, Says Top Banking Regulator
In brief
- The acting Comptroller of the Currency, Brian Brooks, spoke at the LA Blockchain Summit today.
- He said he wants to help provide regulatory clarity about cryptocurrencies.
- Since assuming the role, he's clarified that banks can hold custody over cryptocurrencies.
Brian Brooks, head of the US regulatory agency that supervises the nation’s banks, spends his days trying to calm the cryptocurrency industry’s raging seas.
“If there’s bad activity in crypto, we need to get rid of it,” said the head of the Office of the Comptroller of the Currency (OCC) in an interview at the LA Blockchain Summit today. But, “If we’re going to get the benefit of these radical new technologies that will make credit more accessible, that will help those people who have not been included in the old system, we gotta figure it out.”
See: City watchdog bans sale of risky cryptocurrency-linked products to protect retail investors against shock losses
Brooks, formerly the top lawyer for leading US-based cryptocurrency exchange Coinbase, has advocated for clarity about cryptocurrencies since becoming the acting Comptroller of the Currency, a role he assumed in April of this year.
In July, the OCC clarified that regular banks could custody cryptocurrencies. And last month, it clarified that banks could hold the reserves of companies that issue stablecoins.
“Over time, these blockchains may really just be payment [systems],” said Brooks of stablecoins. “If so, we need to start providing some clarity to banks about the circumstances in which they can support those blockchains and at some time can use it in the future,” he said today. “We’re working with our other agencies to ensure that there’s clear and consistent messaging on that.”
Institutions are “hostile” to crypto, he said, though that’s because regulators haven’t put forward a framework to minimize risks. “What we’re trying to do is just provide clarity,” he said. “The market can only develop organically if there’s clarity.”
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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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