FinTech TL;DR Regs (April 23)
Hi all 👋
Here’s this week’s FinTech regulatory TL;DR…lots going on!
First, though, my legal and compliance team at BlueVine is hiring! If you know anyone interested in a product lawyer or sr compliance analyst role, I’m happy to chat. TL;DR: rocketship for SMB lending and banking needs.
Artificial Intelligence
The FTC released a blog post on artificial intelligence this week. Big deal, everyone’s talking about AI, right?
Well this post has some interesting language like:
The FTC can go after “unfair or deceptive practices” which includes the “sale or use” of “racially biased algorithms.”
FinTechs could be liable for exaggerating what their algorithms can do, and whether their algos are fair and unbiased.
For a detailed breakdown, check out U. Wash. Law’s Ryan Calo’s Twitter thread on the blog post:
What does this mean for FinTech? Increased scrutiny and enforcement actions for discrimination in lending.
SBA Leans on FinTech (Again)
The Small Business Administration (SBA) is leaning on FinTech again to help with its stimulus programs:
FinTech & AI Task Force
Congresswoman Waters announced the reauthorization of the Financial Technology and Artificial Intelligence Task Forces. They’ll investigate how FinTech and AI are evolving to better understand what laws and regulations are needed.
Crypto
Wyoming DAOs
On Wednesday, Wyoming’s governor signed the state’s new law that recognizes DAOs as a new type of LLC. It’s the first law in the US to recognize DAOs as a legal entity.
Big open Q: how much will other states respect and recognize DAO LLCs formed in WY? It seems like other states will just treat them as normal LLCs, but that raises a host of issues (who do you go to for annual filing fees?).
Binance & Brooks
Per the WSJ, Binance has hired Brian Brooks to be CEO of Binance.US, the US affiliate of Binance. His presence will lend significant credibility to Binance’s attempts to clean up its reputation in the US.
UCC Proposal
The Uniform Law Commission1 released a memo that would extend the Uniform Commercial Code (UCC) to crypto, and specifically mentioned Bitcoin by name.
Until now, they had been silent on crypto which created uncertainty over how you can enforce your legal rights to any BTC you own.
Background: The UCC governs how you can establish your claim to to “collateral” (e.g., real property, a bank account). It can require things like filing notice in a state, or entering a certain agreement. That way, if someone else tries to claim it as their own, you have a way to prove its yours.
TL;DR: this is much needed clarity.
Fed SMB Credit Report
The Federal Reserve released its report on the state of credit for SMBs with employees. Some highlights:
64% of SMBs surveyed said they’d apply for more govt aid if it were offered.
A much greater percentage of Asian- (79%), Black- (77%), and Latix-owned (66%) SMBs reported their financial condition as fair or poor compared to average (57%).
91% of SMBs surveyed applied for emergency aid; 82% applied for PPP. Those that got aid said they were less likely to reduce payroll and rehire laid-off employees.
SPAC Amendments
The SEC has thrown cold water on the overheated SPAC frenzy (see, e.g., the public statement by Director Coates).
SPAC’ed companies are taking notice. This week, SoFi proactively amended it’s S-4 to reflect new accounting guidance:
It’s safe to say we can expect more amendments like this.
Coconut Bribery
Ending on a fun note, h/t to Hailey Lennon for pointing out this hilarious excerpt from a piece on Bitmex and the CFTC:
Hope y’all have a good weekend. 👋
About
Any views expressed are my own (well, sort of? I mean, they’re laws and regulations, so they’re not really “mine”). Nothing here is legal or financial advice.
The ULC is an org that issues draft laws as a sort of “here are best practices of what should be in a law on X.” Oftentimes, states pass draft their own laws based on ULC’s proposals (which promotes consistency).