Karsten Wenzlaff, Advisor
August 26th, 2025
Karsten Wenzlaff is a Crowdfunding and Fintech Expert from Germany. He is Secretary-General of Digit[...]
Category Archives: Regtech, Compliance, Governance
FSB’s Warnings of Hidden Stakes of AI in Finance
AI Risks | Nov 19, 2024
Image: Financial Stability Implications of Artificial Intelligence (FSB)
Why the FSB’s Warning Matters More Than You Think
For those who think AI is simply automating tasks, in new report published Nov 14, 2024 titled, "The Financial Stability Implications of Artificial Intelligence" (40 page PDF) the Financial Stability Board (FSB) warns think again. AI is fundamentally changing how financial institutions operate, strategize, and compete. In less than two years, Generative AI and innovative large language models like ChatGPT are game changing the space. Banks and financial institutions are already investing in AI technologies or exploring its capabilities for using AI for everything from complex underwriting to optimizing investment allocations and autonomous bots in the agentic web.
See: NIST Insights: GenAI Risk Management Framework
The FSB is warning that these advancements come with deeper and much more significant risks where financial markets would be at the whim of AI systems all reacting in unison given that they are trained on mostly identical data, making the same decisions at lightening speed, all magnifying shock risks that could trigger widespread instability. Let's break it down.
Risk 1: Too Much Reliance on the Same Players
The report highlights that AI relies on special tech infrastructure such as specialized hardware (i.e., NVIDA chips), cloud services, and pre-trained models that collectively are creating a 'single point of failure' risk. The risk is about third-party dependencies and concentration in the AI supply chain. There are only a limited number of providers and in the event of a key provider facing disruption, it could create a systemic vulnerability that could paralyze global financial operations.
Risk 2: Groupthink on Steroids
As mentioned above, AI models often use the same training data and algorithms which means that many institutions could end up making similar AI-driven decisions under stress. For example, if trading algorithms automatically respond to market drops all in the same fashion, then liquidity could dry up instantly triggering a market meltdown (instead of a routine dip).
See: Canada and Trump Risk Index What Fintechs Need to Know
We've all heard of 'flash crashes' or recent 'run on banks' that are hyper sensitive in the digital age (think pressing a button to get ones money out versus back in the day, lining up at a bank branch to withdrawal funds). Further, mass adoption of AI on a much larger scale could make these event risks more frequent and severe.
Risk 3: The Rise of AI-Powered Fraud
AI technologies are helping both good and bad actors. These days, GenAI can generate realistic fake identities, deepfake videos, and even manipulate sentiment using misinformation campaigns. Imagine a fake video of a CEO announcing a company’s collapse and markets responding negatively before the truth surfaces. Further, a deeper issue of fraud in an AI driven world is that the current fraud detection systems used by governments, central banks, financial institutions, pretty much everyone were not designed to protect against AI smart attacks. And it will take time before these same tools that institutions are using to optimize their operations can also be sophisticated to enough to protect themselves from escalating threats. The 'cat-mouse' game of fraud has always been there but AI risks increasing the gaps in any system.
Risk 4: Misaligned Incentives
Simply put, artificial intelligence tools and the ownership entities behind them can prioritize profit over ethics. One example is an AI bot looking to optimize profit may find it beneficial to spread disinformation to then profit from shorting a stock. While the bot may generate returns in the short term, the long term damage to financial markets and the trust in the systems that manage them could become toxic.
So What Needs to Happen?
There needs to be a mix of better oversight and governance, smarter regulations and more international collaboration. Financial institutions need to rethink how they will adopt and deploy AI by:
See: OECD-FSB Discuss New AI Trends in Finance
- Creating AI solutions by working with a wider range of partners (to mitigate supply chain risk) and develop in-house if possible.
- Building robust security and risk management programs that can withstand disruptions and remain resilient.
- Establishing clear governance practices of how AI systems align with regulations and ethical principles.
Conclusion
The FSB's report is a warning to financial institutions, regulators, and global leaders that they must act now and address vulnerabilities in AI governance, third party dependencies, and security. The stakes are high, and the time to act is now.
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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Latest BoC Update for Retail Payment Service Providers
Retail Payments | Nov 18, 2024
Image: Freepik/gpointstudio
What’s Next for Retail Payments Supervision?
Registration for the Retail Payment Activities Act (RPAA) with the Bank of Canada has now wrapped up. If you're a Payment Service Provider (PSP), here's what you need to know about staying compliant, avoiding fines, and operating during the transition period, staying compliant.
1. Transition Period (November 1, 2024 - September 7, 2025)
The transition period allows PSPs who applied on time to keep operating while the Bank of Canada reviews their applications. If you haven’t applied yet, you need to do so right away to stay on the right side of the law.
2. Why You Need to Apply Now - Enforcement
If you’re operating without being registered, you could face heavy fines up to $10 million for serious violations. The Bank of Canada can issue notices if they think you’re breaking the rules. See enforcement tools.
3. Keep Your Application Up to Date
- Check your email regularly, just in case the Bank asks you for more details as they review your application.
- If anything changes after you’ve applied, update your application right away through PSP Connect. See amendments to registration applications.
4. Starting Operations During the Transition Period
- If you applied on time, you can start your payment activities whenever you're ready.
- If you're planning to start operating now, make sure you applied at least 60 days before beginning.
See: Key Findings from 2025 Advanced Payments and Fintech Survey
- If the transition period is nearly over and you still haven’t applied, you’ll need approval before you can start operating.
What You Should Do Next
- The Bank will publish final registration decisions in September 2025.
- If you haven’t applied yet, do so as soon as possible.
- Keep an eye on updates from the Bank of Canada about your application.
- Update any changes to your application right away.
Need help? Contact the Bank of Canada through this general inquiries form.
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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Elon Musk’s X Challenges California’s Deepfake Law
AI and Tech Regulation | Nov 18, 2024
Image: Freepik/pikisuperstar
Elon Musk’s X lawsuit Over California’s Deepfake Law Ignites Debate on Free Speech, AI Ethics, and the Future of Tech Regulation
On Sept 17, 2024, the Governor of California, Gavin Newsom introduced the Defending Democracy from Deepfake Deception Act of 2024 (otherwise known as Assembly Bill 2655). It's a new law aimed at curbing the growing issue of AI-generated deepfakes, especially those that could mislead voters during elections. The law requires platforms like X (formerly Twitter) to either label or remove deceptive content related to elections.
Then on October 3, 2024, a federal judge granted a preliminary injunction which temporarily blocked the enforcement of AB 2655 based on concerns that the law might infringe upon First Amendment rights by potentially suppressing free speech.
See: California’s AI Safety Bill Veto and Its Impact
Then last Thursday, Nov 14, 2024, Elon Musk's X has filed a lawsuit in Sacramento against the legislation arguing that it infringes on free speech rights protected by the First Amendment. X's legal challenge highlights the ongoing conflict between maintaining freedom of expression versus curbing the misuse of deepfakes that erode trust in institutions and manipulate public opinion.
Insights
- The amount of deepfake content online has been exponentially doubling between 2018 and 2020. There's been a noticeable increase in cases targeting political figures and events.
- In July 2024, Musk shared a deepfake video of Vice President Kamala Harris on X that went viral but he forgot to mention that it was a parody. In response, California's Governor Gavin Newsom stated, "Manipulating a voice in an 'ad' like this one should be illegal. I'll be signing a bill in a matter of weeks to make sure it is.".
- The purpose of California’s AB 2655 legislation is protect election integrity by preventing manipulative deepfake content from spreading misinformation. Critics argue that the law is too broad and that it may impact artistic expression, satire and even legitimate political commentary.
"[The law] will inevitably result in the censorship of wide swaths of valuable political speech and commentary and will limit the type of 'uninhibited, robust, and wide-open' debate on public issues that core First Amendment protections are designed to ensure."
Rob Bonta, California Attorney General said last Friday:
"The California Department of Justice has been and will continue to vigorously defend AB 2655 in court, which aims to combat deepfake election content."
Why It Matters
This case is a key test for how governments and tech companies handle the rising influence of AI while protecting basic rights.
See: Three Generations Discuss AI Concerns, Hopes, and the Future
The decision will have significant impact into how technology is regulated from an election misinformation standpoint to broader AI abuses. For Canada and other countries, it provides valuable lessons on the need create laws that balance innovation, ethics, and public trust.
Conclusion
The lawsuit isn't just about California but it's a global conversation on how societies will balance freedom and accountability in the digital age. As AI technology evolves at a dizzying pace, societies must answer tough questions about who holds power in the digital world and how to ensure that power is used responsibly.
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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18 States Sue SEC for Regulatory Overreach on Crypto
Crypto Regulation | Nov 15, 2024
AI image
18 U.S. States Coalition Sue the SEC for Regulatory Overreach and Stifling Crypto Innovation
As reported by the Defiant, and in a surprising move (given that the new Trump administration is taking the reigns soon), an 18 U.S. state coalition led by Kentucky Attorney General, Russell Coleman, joined forces with the DeFi Education fund and filed a lawsuit against the U.S. Securities and Exchange Commission (SEC) including Chair Gary Gensler and Commissioners for the agency's controversial crypto enforcement practices which they see as federal overreach.
Plaintiffs:
“The SEC has sought to unilaterally wrest regulatory authority away from the states through enforcement actions targeting the digital asset industry."
Key Challenges in the Lawsuit
- Federal Overreach and the Howey Test
The plaintiffs argue that the SEC’s reliance on the Howey Test (1946 framework for defining securities) is outdated and misapplied to modern digital assets. A July 2023 court ruling in the Ripple case reinforced this argument finding that XRP’s secondary market transactions did not qualify as securities. - Lack of Regulatory Clarity
The crypto industry has long criticized the SEC for failing to provide clear guidelines (even one of its own commissioners and defendants in the lawsuit agrees with this). Since 2021 crypto firms have spent over $429 million on litigation who are forced to operate in a legal gray area. - Economic Impact
The lawsuit goes on to say that the SECs actions limited the economic growth of the the digital asset sector, which currently valued at over $3 trillion has been a game changer in financial inclusion and job creation.
Gensler’s Leadership Under Fire
Under Gensler's leadership at the SEC, the agency handed out major enforcement actions against big players like Coinbase, Kraken, Uniswap, and Ripple. However Gensler's regulate by enforcement approach faced pushback with some of its own commissioners including Hester Peirce and Mark Uyeda criticizing the focus on enforcement instead of clear rules. SEC Chair Gary Gensler recently defended his approach and tough stance on crypto, replying that 'significant investor harm has occurred' in crypto.
Regulatory Outlook for Crypto?
The new incoming administration could bring big changes to how crypto is regulated in the U.S. As part of his campaign platform, President-elect Donald Trump, promised to remove Gensler on his first day in office and appoint officials who support crypto.
See: Inside Federal Securities Laws and Crypto’s Tightrope
Conclusion
As lawsuits continue through the court system, the key question is how federal agencies and/or state governments will shape the future of crypto in America. The outcome will impact innovation, investor protection, and the global competitiveness of crypto markets for years to come.
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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Meta to Appeal €798M EU Fine for Antitrust Violations
Competition | Nov 15, 2024
Image AI
Meta to Appeal Record €798M Fine for Anti Competitive Facebook Marketplace Practices
The European Commission announced a whopping €798 million fine against Meta (formerly Facebook) after regulators found that Meta used unfair tactics by automatically linking Facebook Marketplace to its social network giving it an advantage over competitors in the online classified ads market. This is the largest antitrust fine Meta has faced in Europe (although it pales in comparison to its recent $14 billion data privacy settlement in Texas).
The decision reflects a growing scrutiny of big tech's influence in digital markets, and part of a larger EU effort to hold giant tech firms accountable for their market practices. Other firms like Google and Apple have faced similar antitrust actions in the past. Google recently turned over their $1.7 billion EU competition fine.
Key Details
- The European Commission fined Meta €798 million for violating competition laws in the EU.
- Facebook Marketplace was automatically linked to Facebook accounts which gave Meta an advantage over other online advertising services.
See: EU Advocates Against Big Tech’s Market Control
- Regulators argued that their setup unfairly used Meta's power in the market which disrupted fair competition.
- The Commission said these actions harmed smaller businesses and reduced choices for consumers.
Margrethe Vestager, EU Competition Chief:
“Dominance isn’t illegal, but dominant companies must not abuse their power to harm competition.”
Meta's Response
Meta disagreed with the EU’s decision and to fine it €798 million. The company says Facebook Marketplace was designed to make it easier for people to buy and sell, meeting user needs. Meta's post argues that the ruling ignores how strong the competition is in Europe's online marketplaces and unfairly protects older companies from newer ones like Marketplace. They also said there's no proof that its actions harmed consumers or competing businesses, and plans to appeal the decision.
See: The Global Effort to Level the Playing Field with Tech Giants
Closing
The decision highlights the EU’s commitment to protecting consumers and smaller competitors in the digital economy.
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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Ontario Court Blocks Binance’s Pricey Arbitration Clause
Crypto Enforcement | Nov 7, 2024
Image: Freepik/rawpixel.com
Ontario Court Rejects Binance’s Costly Arbitration, Allows Class-Action in Ontario
The Ontario Court of Appeal supported a previous court ruling against Binance’s arbitration clause. This means a class-action lawsuit against Binance can proceed in Ontario instead of being forced into costly arbitration in Hong Kong. The decision is a significant outcome for consumer rights in the world of digital finance.
See: FINTRAC Fines Binance $6M CAD for Compliance Failures
Binance, a leading global cryptocurrency exchange, required users to agree to address disputes in Hong Kong through an arbitration process. To use the exchange users had to accept the clause which is estimated to cost about $37,000 CAD excluding travel or legal fees, an amount of money that would likely be far out of reach for most users. In 2022, a group of Canadian Binance users launched a class-action lawsuit arguing that Binance violated Ontario securities law by selling crypto derivatives without following regulatory rules. Binance tried to have the case stopped, referring to its Hong Kong arbitration clause which they argued took precedence.
Court's Ruling and Implications
The Ontario Superior Court of Justice originally blocked Binance’s attempt to enforce arbitration, finding the clause unfair and a violation of public policy. Due to the high cost, the arbitration process effectively prevented users from seeking compensation making the clause unreasonable. The Ontario Court of Appeal agreed, setting a clear stance that arbitration clauses that burden users with excessive costs won’t hold up in Ontario courts.
The ruling highlights the importance of using a fair and accessible dispute resolution mechanism in the crypto sector. Companies operating in Canada must ensure that their arbitration clauses do not create unreasonable barriers for unhappy users seeking to resolve disputes.
See: OSC Pursues Binance Investigation, Unfazed by Crypto Exchange’s Departure from Canada
The decision also shows the court's willingness to overrule arbitration agreements that are designed to go around consumer protection laws.
Conclusion
Canadian courts are unlikely to enforce arbitration agreements if they impose high costs that make it hard for users to seek justice. Crypto companies operating in Canada must ensure their dispute policies follow Canadian laws and protect consumer rights. This ruling could influence future cases about arbitration clauses 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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Trump’s Win Puts SEC Chair Gary Gensler at Risk
Gary Gensler | Nov 6, 2024
Image: Freepik
With Trump’s win, SEC Chair Gensler May Step Down, Reshaping U.S. finance
Now that Donald Trump has been re-elected as President of the United States, analysts predict that Gary Gensler Chair of the Securities and Exchange Commission (SEC) will likely resign leading to a shift in the regulatory landscape.
- Historically, an SEC chair typically steps down with a new president so the incoming administration can align leadership. For example, that's what happened to Jay Clayton who was appointed by Trump but stepped down for the Biden transition to office.
- Trump publicly criticized Gensler’s tough stance on crypto at the 2024 Bitcoin conference when he announced plans to replace Gensler and make the SEC friendlier towards digital assets. Like all promises, time will tell what the outcomes will be.
See: Key Takeaways from Bitcoin 2024 Conference
- Gensler's term as SEC Chair has been full of strict crytpo oversight and a raft of notable enforcement actions, so if he exits his role and combined with Trump's pro-crypto stance we can expect more normalized (with less red tape) regulations.
- Once Trump's victory was claimed, it sent Bitcoin to a new all-time-high of $75,000, with the market voting their optimism for lighter regulation on digital assets.
When Gensler was asked about his possible departure, he said:
“I sleep fine.”
Conclusion
Beyond Gensler's anticipated resignation, digital asset stakeholders should monitor upcoming appointments and policy shifts that will influence the financial landscape and future of crypto in the United States. As for who might replace Gensler as the new SEC Chair? We can think of a few candidates of the hop. Crypto mom anyone?
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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