Weekly TechREG US: Federal Agencies Respond to Biden’s Crypto Executive Order; Bank Regulators Urged Banks to Conduct Customer Due Diligence, Avoid De-risking Practices 

tech regulation

This week, the U.S. Treasury proposed to the White House a plan to strengthen international cooperation on crypto regulation to make sure that the country leads the way in setting international standards aligned with U.S. values. The Department of Commerce also closed a consultation on crypto regulation with few respondents but a general view from stakeholders that a retail CBDC may not be necessary in the US. Bank regulators issued a joint statement urging banks to conduct individual risk-based customer due diligence to manage, rather than avoid, anti-money laundering risks. The Consumer Financial Protection Bureau is increasingly using advisory opinions, rather than rulemaking, to regulate certain aspects of the consumer finance space. 


Department of Commerce Urged to Slow-Roll CBDCs And Clarify Crypto Rules  

On Tuesday, July 5, the DoC closed a consultation receiving 34 submissions, 10 of which have been published on the register’s website, with the general view that crypto regulation is needed, but with the usual opposing views between proponents and critics of this new technology and its associated products.  

All the respondents requested regulatory clarity and a level playing field. Another area of agreement is the need for talent and education as U.S. companies will need access to top talent that doesn’t exist yet. The third area where there is agreement but with some differences is about the need for a retail CBDC. The general view is that a CBDC may not be necessary given other alternatives for digital payments. 

U.S. Treasury Creates Global Roadmap to Lead Crypto Standard Setting 

The Secretary of the Treasury delivered to President Biden on Thursday, July 7, a report suggesting that more engagement with foreign counterparts and in international organizations is needed if the U.S. wants to make sure that digital assets around the world respect America’s core values and the country contributes to set international standards. 

The Treasury report outlines the strategy that the U.S. government should adopt for developing and adopting international standards on digital assets, digital payment architectures and CBDCs. 

FDIC Probes Voyager Digital Over Account Insurance Claims 

Voyager Digital marketed its deposit accounts for crypto purchases as safe, but customers might not be afforded the protection they thought because their assets weren’t insured by the Federal Deposit Insurance Corporation (FDIC) in the way they thought, The Wall Street Journal reported Thursday (July 7). 

The report noted that Voyager had marketed the accounts as protected by the FDIC. But that wasn’t entirely the case, and the FDIC is investigating, WSJ reported. This comes as Voyager’s brokerage and lending services have been caught in a tangle of downward-spiraling crypto prices, and the company has filed for bankruptcy. 


Law Firm Probes Zelle’s Fraud Reimbursement  

A San Francisco law firm says it is investigating the fraud reimbursement practices of a number of major American banks that use the Zelle peer-to-peer payment system. The announcement Wednesday (July 6) by Schubert Jonckheer & Kolbe LLP comes eight days after a class action suit against Zelle and Wells Fargo was withdrawn in federal court.  

“Despite Federal laws requiring the reimbursement of unauthorized electronic fund transfers, several major U.S. banks have refused to cover some customers’ fraud claims related to scams taking place on the Zelle payment system,” Schubert Jonckheer & Kolbe said in a press release. 

CFPB’s Innovation Sandbox Too Slow for Fast-Moving Startups 

The Consumer Financial Protection Bureau (CFPB) has terminated special regulatory treatments for two companies, Payactiv and Upstart, in less than one month, losing more than 20% of the firms using special procedures that seek to foster innovation. 

Surprisingly, the requests to terminate the special regulatory treatment came from the companies rather than the agency, raising questions about the requirements imposed by the agency to benefit from this special treatment. 

Fed, FinCEN, OCC Urge Banks to Take More Measured Approach to Customer Due Diligence 

Bank regulators on Wednesday, July 6, issued a joint statement urging banks to properly assess customer relationships and conduct customer due diligence (CDD) to ensure that customers engaged in lawful activities have access to financial services. In other words, to avoid de-risking practices.  

The agencies reminded banks that they must apply a risk-based approach to CDD, including when developing the risk profiles of their customers. 

CFPB To Step Up Use of Advisory Opinion As Rulemaking Alternative 

In the last months, the Consumer Financial Protection Bureau (CFPB) has increased the use of soft tools — such as advisory opinions, circulars or simply blog posts — to complement its rulemaking authority. There is one instrument, advisory opinions, that the CFPB has used more than others in the last two months, and it may offer a new way of regulating some areas in the consumer finance space.  

Just in two months, from early May to early July, the CFPB has issued five advisory opinions — and given the recent comments from CFPB director Rohit Chopra, this trend may not stop any time soon. 

Big Tech, Data 

Google Opens up Google Play Store Ahead of Potential Legislation 

On June 30, Google announced in its blog an agreement with a group of U.S. developers to avoid costly and lengthy litigation about terms and conditions of the Google Play Store, including the fees charged. The proposed settlement, which still has to be approved by a court, will establish a $90 million fund to support U.S. developers who earned $2 million or less through Google Play during each year from 2016 to 2021.

The settlement reached by Google and a group of U.S. developers included a few commitments that could also signal how far Google is willing to go to minimize the impact of any potential legislation affecting its Google Play store in the U.S. 

CFPB Bolsters Data Privacy, Cybersecurity Regulations 

The Consumer Financial Protection Bureau (CFPB) on Thursday (July 7) handed down new data privacy and cybersecurity regulations to dictate how companies can use and share credit reports and background reports under the Fair Credit Reporting Act. 

“Americans are now subject to round-the-clock surveillance by large commercial firms seeking to monetize their personal data,” said CFPB Director Rohit Chopra in the press release. “While Congress and regulators must do more to protect our privacy, the CFPB will be taking steps to use the Fair Credit Reporting Act to combat misuse and abuse of personal data on background screening and credit reports.” 

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