Mahi Sall, Advisor, Fintech-Bank Partnerships, Payments and Financial Inclusivity
January 25th, 2023
Mahi Sall is the CEO & Founder of FinXpair, a Berlin-based strategic advisory boutique firm focu[...]
Category Archives: Legal Issues, Regulation, Consultation
Ex-Binance CEO CZ Faces Up to 10 Years in Prison
Crypto | Nov 28, 2023
Image: Unsplash/Kanchanara
Ex-Binance CEO Changpeng Zhao Faces Up to 10 Years in Prison Amid Bank Secrecy Act Violations
Changpeng Zhao, the former CEO of cryptocurrency exchange Binance, is currently facing a potential prison sentence of up to 10 years. This development follows his guilty plea for violating the Bank Secrecy Act. The U.S. Department of Justice (DOJ) has expressed frustration over Zhao's permission to reside in the UAE until his sentencing, considering his billionaire status and the UAE's lack of an extradition treaty with the U.S.
See: SEC Files Lawsuit and Accuses Kraken of Commingling
Key Points
- Zhao has been charged by the DOJ for violating the Bank Secrecy Act, with the prosecution possibly arguing for a maximum 10-year term. This is a significant increase from the initially anticipated 12-18 month sentence.
- Binance has agreed to pay a massive $4.3 billion fine, marking one of the largest enforcement actions against a crypto platform. Zhao himself was personally fined $50 million.
- Attorneys for Zhao, a dual citizen of Canada and the UAE, submitted a motion last Thursday to the Western District of Washington in Seattle. They argued that Zhao is not a flight risk, emphasizing his voluntary appearance in court to enter a guilty plea to the charges.
- Despite his guilty plea, Zhao has been allowed to travel to and live in the UAE until his sentencing. This decision is contentious due to his wealth and the UAE's non-extradition status with the U.S.
See: UK Leading Charge in Global Crypto Tax Crackdown
Importance of the Case
This case is a landmark in terms of legal action against a major figure in crypto, highlighting the increasing scrutiny and regulatory actions in the industry, and importance of compliance with laws like the Bank Secrecy Act. This case could set a precedent for how legal systems worldwide handle similar situations in crypto.
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, artificial intelligence, 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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UK’s Digital Pound Initiative Sparks Privacy Discussions
Regulation | Nov 24, 2023
Image by storyset on Freepik
UK's Approach to CBDCs and Privacy
On November 7, 2023, a question raised in the UK Parliament by Mr. David Davis, a Conservative MP, brought to light the critical issue of privacy in the context of a UK CBDC. The response from Andrew Griffith, also a Conservative MP, emphasized the UK Government's commitment to ensuring rigorous standards of privacy and data protection in the design of a digital pound.
Notably, the government assures that neither it nor the Bank of England would have access to personal data or insights into consumer spending habits.
A recent development in the UK Parliament highlights the growing concern and attention towards the privacy implications of these digital currencies. As Canada's fintech community closely monitors global trends, the discussion around the UK's potential digital pound offers valuable insights.
Implications for Fintechs and Canada
For fintech companies and stakeholders in Canada, the UK's stance on privacy in the realm of digital currencies is both a benchmark and a learning opportunity. It highlights the importance of balancing innovation with consumer rights, particularly in a domain as sensitive as financial transactions. The UK's consultative approach, involving feedback from February to June 2023, also highlights the role of stakeholder engagement in shaping fintech policies.
See: Jon Conliffe Speech: A digital pound will be needed in this decade
As Canada explores the possibility of its own CBDC digital currency, the UK's model provides a framework for considering privacy and data protection. It is important for Canadian fintech innovators, regulators, and policymakers to prioritize user privacy and control while designing digital financial solutions.
The dialogue in the UK Parliament about the privacy aspects of a potential digital pound is a significant moment for the global fintech community.
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, artificial intelligence, 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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Final Retail Payment Regulations Released Paving Way For Implementation
Payments Regulation | Nov 24, 2023
Image: Pexels/Breakingpic
The final regulations for the Retail Payment Activities Act (RPAA) have been published in the Canada Gazette, Part II.
These regulations help clarify the details of the legislation and outline the intentions of the law. Payment service providers (PSPs) will be required to register with the Bank of Canada starting on November 1, 2024.
The Bank’s related supervisory requirements will follow in September 2025. More information is now available.
More resources:
- Canada’s New Retail Payment Regulations: Registration and Compliance
- Summary: This article explores Canada's Retail Payment Activities Framework, impacting PSPs in 2024. It discusses compliance, exemptions, and its effect on the fintech sector.
- Published: Nov 16, 2023
- Read more
- Preparing for Retail Payment Act Changes
- Summary: Discusses the final regulations under the Retail Payment Activities Act in Canada, expected to be published in the Canada Gazette II, and the significant changes and preparations in retail payments supervision.
- Read more
- Regulatory Consultation (Feedback by March 28, 2023): Retail Payment Activities Act (RPAA)
- Summary: Covers the Department of Finance Canada’s proposed regulations on the RPAA, published for public comment, and the importance of the public comment period.
- Read more
- McCarthy Tetrault: Fintech Regulatory Developments: 2021 Year in Review
- Summary: Discusses the introduction and enactment of the Retail Payment Activities Act (RPAA) in 2021, including requirements for payment service providers in Canada.
- Read more
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, artificial intelligence, 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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Insights from the UK’s Pro-Innovation Regulation Review
Nov 23, 2023
Image: Unsplash/Alex Wong
Transformative Approach to Regulation Focusing on Innovation and Economic Growth
In November 2023, the UK government received a key document, the "Pro-innovation Regulation of Technologies Review – Cross-cutting and Growth Duty," authored by Professor Dame Angela McLean outlining a transformative approach to regulatory practices, emphasizing innovation and economic growth.
Overview of the Regulators’ Growth Duty
The Regulators’ Growth Duty is a legislative requirement in the UK that mandates most regulatory bodies to consider the impact of their activities on economic growth. This duty is embedded within the broader regulatory framework and aims to ensure that regulators do not unnecessarily impede innovation and business development. It reflects a shift from a purely compliance-based approach to one that actively considers the economic implications of regulatory actions.
See: The UK’s PRA Commitment to International Competitiveness and Growth
Key Guidance
- The guidance emphasizes the need for regulators to find a balance between fulfilling their primary responsibilities (such as ensuring public safety and compliance with the law) and supporting economic growth and innovation.
- Regulators are encouraged to adopt a flexible and proportionate approach to regulation. This means tailoring regulatory actions to the specific context and needs of different industries, minimizing unnecessary burdens on businesses.
- The guidance suggests that regulators should actively engage with businesses and other stakeholders to understand the impact of regulation on economic growth and innovation. This includes seeking feedback and being responsive to the needs of the business community.
- The Regulators’ Growth Duty includes a reporting and accountability requirement, where regulatory bodies are expected to document and demonstrate how they have considered economic growth in their decision-making processes.
Report Recommendations
The McLean report’s recommendations are both forward-looking and pragmatic. They reflect a practical understanding of the rapidly evolving technology landscape and the need for regulatory frameworks that can adapt equally swiftly. These recommendations set the stage for a regulatory environment where innovation is actively encouraged, where regulatory bodies are partners in progress rather than mere gatekeepers.
See: UK’s Future Crypto and Stablecoin Regulation
1. Importance of a coordinated, cross-government approach to innovation
- The report underlines a critical shift in regulatory thinking – from a traditional, compliance-focused approach to one that actively fosters innovation.
- Central to this strategy is the creation of the Department for Science, Innovation, and Technology (DSIT) and the National Science and Technology Council (NSTC).
2. Balancing Regulatory Duties with Innovation Promotion
- A key insight from the report is the delicate balance regulators must maintain between their traditional roles and the imperative to spur innovation. The proposed revision of the Regulators’ Growth Duty guidance seeks to recalibrate this balance to better align with the fast-paced nature of technological advancement, ensuring regulators are not only protective but also proactive in supporting innovative developments.
- It aims to equip regulators with the tools and mandate to not just oversee, but actively promote, growth and innovation.
- This approach recognizes the dual responsibility of regulators in ensuring public safety and fostering an ecosystem where new technologies can thrive.
3. Addressing Skills and Resource Gaps
- The report also casts a spotlight on a crucial challenge facing regulatory bodies – the gap in specialized skills and resources. It calls for more flexible hiring practices and pay scales, enabling regulatory bodies to attract top talent, particularly in niche technology areas.
See: Canada’s Open Banking Journey: What Canada Can Learn from the UK | Interview with Helen Child, Founder of Open Banking Excellence
- Furthermore, it advocates for systematic secondments between government, academia, and industry, facilitating a cross-pollination of ideas and expertise. This initiative promises to create a more dynamic and informed regulatory workforce, adept at navigating the complexities of emerging technologies.
Implications
The guidance challenges regulators to think beyond the traditional scope of their roles. It requires a more dynamic approach to regulation, one that acknowledges the importance of economic growth and technological advancement. Regulators are expected to be enablers of innovation, not just overseers of compliance.
For businesses this duty is seen as a positive development, as it signals a more supportive regulatory environment. It suggests a future where regulatory hurdles are minimized, where innovation is met with enthusiasm and support rather than skepticism and red tape. This shift is likely to attract more investment in technology sectors, positioning the UK as a global leader in innovation.
Is There a Regulators' Growth Duty in Canada?
The Ontario Securities Commission (OSC) expanded its mandate, as part of the 2021 Ontario Budget Legislation, to include fostering capital formation and encouraging economic growth through increased competition.
See: The Formation of the Canadian Digital Regulators Forum and its Impact on the Digital Economy and Consumer Privacy
This expansion suggests a parallel with the UK's Regulators’ Growth Duty, focusing on balancing regulatory responsibilities with economic growth and innovation, and aligns the OSC's objectives with those of other Canadian provinces and other international jurisdictions including the UK, Australia, and Singapore.
Blueprint for the Future
The "Pro-innovation Regulation of Technologies Review" serves as a blueprint for other nations grappling with the challenges of regulating in an era of rapid technological change. It offers a vision of agile and proactive regulation and represents a modern approach to regulation, one that recognizes the importance of balancing protective measures with the need to foster economic growth and innovation. This approach is expected to contribute significantly to creating a business-friendly environment, encouraging investment and development in cutting-edge technologies.
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, artificial intelligence, 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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hile safeguarding the public interest.
Feds Promise Open Banking Laws in 2024 and to Broaden Access to Payments Canada
Open Banking | Nov 23, 2023
Image: Unsplash/Viktor Forgacs
In this weeks Fall Economic Statement the federal government announced plans to introduce open banking laws in 2024, and to expand Payments Canada membership eligibility.
See: Bill C-365: Paving the Way for Open Banking in Canada?
Open Banking Legislation Coming 2024
- The Canadian government has announced plans to introduce open banking legislation in Budget 2024.
- Open Banking will enable consumers to securely share their financial data with trusted third-party providers, unlocking a new era of personalized financial services.
- The legislation aims to enhance consumer control over financial data, promote competition, and foster the development of innovative financial solutions, marking a significant shift towards a more consumer-centric financial landscape in Canada.
Payments Canada to Expand Membership
- Another key announcement affecting fintech is the expansion of Payments Canada eligibility. This change will allow companies beyond the traditional big banks to participate in Payments Canada who are leading the development of a new Real-Time Rail payment system, such as payment service providers supervised by the Bank of Canada and local credit unions.
See: Insights Into Canada’s Evolving Payments Landscape
- This expansion is expected to drive down transaction costs and accelerate the transition to faster, more secure payment systems, significantly enhancing the efficiency and inclusivity of Canada's financial infrastructure.
Believe It When You See It?
Checkout the statements for yourself: See Section 2.1: Making Life More Affordable
Together, these initiatives will reshape how Canadians interact with their finances, offering more choices, better services, and a stronger, more resilient financial system for the future.
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, artificial intelligence, 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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CZ Pleads Guilty. Fined $4.3 Billion in DOJ Settlement
Crypto | Nov 23, 2023
Image by Racool_studio on Freepik
Changpeng Zhao, Binance CEO steps down following $4.3 billion settlement with U.S. regulatory agencies.
- Changpeng Zhao (CZ), the CEO of Binance, has stepped down and pleaded guilty (federal court in Seattle) to breaking U.S. anti-money laundering laws as part of a $4.3 billion settlement resolving a years-long probe into the world's largest crypto exchange.
- Binance broke U.S. anti-money laundering and sanctions laws and failed to report over 100,000 suspicious transactions, including those linked to terrorist groups and illegal activities.
- The settlement includes a $3.4 billion penalty to the Financial Crimes Enforcement Network (FinCEN) and $968 million to the Office of Foreign Assets Control (OFAC), along with compliance requirements and monitoring for five years.
See: SEC Files Charges Against Binance for Mishandling Funds and Deceiving Regulators
- Reuters reported the settlement includes a $1.81 billion payment within 15 months and a further $2.51 billion forfeiture.
- Zhao will personally pay $50 million as part of the settlement, which is described as one of the largest corporate penalties in U.S. history.
- Per Coindesk and details in a legal document, he is arranging a $15 million deposit in a trust managed by Davis Wright Tremaine, distinct from the bond amount. This is to ensure compliance with the conditions of his release, with an agreement to surrender these funds in case of any violation.
- Additionally, he is securing the backing of two guarantors, who are committing $250,000 and $100,000 each.
Today, I stepped down as CEO of Binance. Admittedly, it was not easy to let go emotionally. But I know it is the right thing to do. I made mistakes, and I must take responsibility. This is best for our community, for Binance, and for myself.
Binance is no longer a baby. It is…
— CZ 🔶 Binance (@cz_binance) November 21, 2023
"These resolutions acknowledge our company’s responsibility for historical, criminal compliance violations, and allow our company to turn the page" -- Binance statement
What's Next?
- The date for his sentencing has been set for February 23, 2024, at 9 a.m. Pacific Time.
- Zhao will remain the majority shareholder of Binance and will serve as a consultant on historical areas of the business.
- Richard Teng will succeed him as CEO.
See: SEC Files Lawsuit and Accuses Kraken of Commingling
- The case against Zhao and Binance highlights the increasing regulatory scrutiny on cryptocurrency exchanges globally. The settlement is seen as a significant step towards greater compliance and regulatory oversight in the crypto industry.
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, artificial intelligence, 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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SEC Files Lawsuit and Accuses Kraken of Commingling
Crypto Enforcement | Nov 21, 2023
Image: Unsplash/Bryan Burgos
The SEC has filed a lawsuit accusing Kraken of operating as an unregistered platform and improperly mixing customer funds with corporate assets.
This move echoes previous actions taken by the SEC against other major exchanges like Coinbase and Binance. Kraken, a prominent crypto exchange, has become the latest target of the U.S. Securities and Exchange Commission (SEC).
SEC Allegations
According to the SEC, Kraken has not only operated as an unregistered broker, clearing agency, and dealer but has also commingled up to $33 billion in customer crypto with its corporate assets. The SEC's lawsuit seeks to permanently ban Kraken from operating as an unregistered exchange and demands a fine along with the return of any ill-gotten gains.
Kraken Stands Firm and Criticizes SEC
Kraken stands firm in its disagreement with the SEC's allegations. The exchange asserts that it does not list securities and plans to vigorously defend its position. Kraken emphasizes the lack of regulatory clarity in the U.S. and criticizes the SEC's approach of "regulation by enforcement," which it believes harms American consumers, stifles innovation, and undermines U.S. competitiveness globally.
See: Kraken’s Strategy for Canadian Market Growth
In its blog post, Kraken outlines its stance, highlighting that the SEC's complaint does not allege fraud, market manipulation, customer losses due to hacking, compromised security, or breaches of fiduciary duty. Kraken argues that the SEC's claim of "commingling" is a misrepresentation, as it merely involves the use of fees already earned by the exchange.
Kraken also points out the legal precedents where courts have rejected the SEC's theory that digital assets traded on platforms are securities transactions. The exchange believes that the current lawsuit will fail for similar reasons. Kraken emphasizes that there is no legal framework for registering as an exchange, broker-dealer, or clearing agency for investment contracts, as demanded by the SEC.
Committed to Accelerating Crypto Adoption
Amidst this legal battle, Kraken remains committed to its mission of accelerating cryptocurrency adoption and ensuring financial freedom and inclusion.
See:
Kraken Agrees to $30 million Settlement with SEC and Stops U.S. Customer Staking Program
Kraken (Payward Inc.) in Advanced Stages of SEC Unregistered Securities Probe
The exchange continues to advocate for practical and effective rules for digital assets and stresses the importance of comprehensive Congressional action to avoid the U.S. falling behind in the global crypto and Web3 advancements.
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, artificial intelligence, 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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