February 18, 2022

The Securities and Exchange Commission charged BlockFi Lending LLC (BlockFi) with failing to register the offers and sales of its retail crypto lending product. In this first-of-its-kind action, the SEC also charged BlockFi with violating the registration provisions of the Investment Company Act of 1940. To settle the SEC’s charges, BlockFi agreed to pay a $50 million penalty, cease its unregistered offers and sales of the lending product, BlockFi Interest Accounts (BIAs), and attempt to bring its business within the provisions of the Investment Company Act within 60 days. 

Congressman Warren Davidson (R-OH) introduced new legislation to protect self-hosted crypto wallets from government agencies. The bill aims “[t]o prohibit Federal agencies from restricting the use of convertible virtual currency by a person to purchase goods or services for the person’s own use, and for other purposes.” Specifically, the bill bars agency heads from restricting the ability to “[u]se virtual currency or its equivalent for such user’s own purposes, such as to purchase real or virtual goods and services for the user’s own use; or conduct transactions through an self-hosted wallet.”

U.S. Congressman Josh Gotthiemer (NJ-5) released a discussion draft of the Stablecoin Innovation and Protection Act of 2022, legislation focused on defining qualified stablecoins, carving qualified stablecoins out from more volatile cryptocurrencies, and putting appropriate protections in place for consumers and investors. The law “will help lower the risk of instability in the financial market, protect consumers, and support ongoing fintech innovation in the U.S.”

The Federal Deposit Insurance Corporation (FDIC) today released the hypothetical economic scenarios for use in the upcoming stress tests for covered institutions with total consolidated assets of more than $250 billion. 

U.S. Senators Jim Risch (R-Idaho) and Bob Menendez (D-N.J.), ranking member and chairman of the Senate Foreign Relations Committee, and Bill Cassidy (R-La.) introduced the Accountability for Cryptocurrency in El Salvador (ACES) Act , legislation requiring a State Department report on El Salvador’s adoption of Bitcoin, a cryptocurrency, as legal tender and a plan to mitigate potential risks to the U.S. financial system.

The U.S. Department of Education approved $415 million in borrower defense claims. Nearly 16,000 borrowers will receive $415 million in borrower defense to repayment discharges following the approval of four new findings and the continued review of claims. This includes approximately 1,800 former DeVry University (DeVry) students who will receive approximately $71.7 million in full borrower defense discharges after the U.S. Department of Education (Department) determined that the institution made widespread substantial misrepresentations about its job placement rates.

The Office of the Comptroller of the Currency (OCC) announced conditional approval of the conversion of Protego Trust Company, a Washington state-chartered trust company, to become Protego Trust Bank, National Association.

The Consumer Financial Protection Bureau (CFPB) issued a compliance bulletin outlining the existing prohibitions against prepaid cards being the sole method for distributing government benefits. The bulletin underscores rules intended to protect market competition and to protect people’s right to have a choice in how they receive their money under the Electronic Fund Transfer Act (EFTA). The CFPB stated that government contractors that illegally harvest fees will be subject to enforcement actions. 

The U.S. Department of the Treasury’s Federal Insurance Office (FIO) announced that it has joined the Network of Central Banks and Supervisors for Greening the Financial System (NGFS). 

The Justice Department announced the selection and appointment of Eun Young Choi to serve as the first Director of the National Cryptocurrency Enforcement Team (NCET). Ms. Choi is a seasoned prosecutor with nearly a decade of experience within the department, and most recently served as Senior Counsel to the Deputy Attorney General. She will assume her duties full-time effective immediately.

The Securities and Exchange Commission is examining the relationship between the U.S. arm of Binance, the world’s largest cryptocurrency exchange, and two trading firms with ties to Binance’s founder, people familiar with the probe say. The two trading firms, Sigma Chain AG and Merit Peak Ltd., act as market makers that trade cryptocurrencies on the Binance.US exchange. One area of focus for regulators is how Binance.US disclosed to customers its links to the trading firms, the people say.

Federal Deposit Insurance Corporation (FDIC) Acting Chairman Martin J. Gruenberg announced on his first day the agency’s priorities for 2022:

  • Strengthen Community Reinvestment Act (CRA);

  • Address Financial Risks Posed by Climate Change;

  • Review Bank Merger Process;

  • Evaluate Crypto-Asset Risks; and

  • Finalize Basel III Capital Rule.

The Justice Department announced it seized more than $3.6 billion in bitcoin allegedly stolen as part of a 2016 hack of Bitfinex. 

U.S. Secretary of the Treasury Janet L. Yellen convened a meeting of the Financial Stability Oversight Council (FSOC). The council heard an update from Treasury staff on its 2021 priorities and new priorities for 2022, including climate-related financial risks, nonbank financial intermediation, Treasury market resiliency, and digital assets. The Council voted unanimously to approve a statement highlighting the importance of recent interagency efforts to identify and respond to potential financial stability risks arising from nonbank financial intermediation, and expressing support for regulatory reforms that would mitigate those risks. 

February 20th-22nd: Partner John Collins will speak at the Conference for Community Bankers. 

February 24th: Senior Advisor Amy Friend will speak on a panel for the Alliance for Innovative Regulation’s webinar entitled “Make Money Green: Climate, ESG and Financial Regulation.”