March 27, 2024

President Joe Biden signed into law a $1.2 trillion spending package, keeping the U.S. government funded through a fiscal year that began six months ago. PresidentBiden described the package, which Congress overwhelmingly passed in the early hours of Saturday, as investing in Americans as well as strengthening the economy and national security. President Biden urged Congress to pass other bills stuck in the legislative chambers. The Democratic-majority Senate passed the spending bill with a 74-24 vote. Key federal agencies including the departments of Homeland Security, Justice, State and Treasury, which houses the Internal Revenue Service, will remain funded through Sept. 30.

The Department of the Treasury (Treasury) released a report on Managing Artificial Intelligence-Specific Cybersecurity Risks in the Financial Services Sector. The report follows from the Executive Order on the Safe, Secure, and Trustworthy Development and Use of Artificial Intelligence (AI). In the report, Treasury identifies significant opportunities and challenges that AI presents to the security and resiliency of the financial services sector. The report outlines a series of next steps to address immediate AI-related operational risk, cybersecurity, and fraud challenges.

The Justice Department charged KuCoin, one of the world’s largest cryptocurrency exchanges, with allegedly violating anti-money laundering laws and becoming an illicit-finance hub. The Justice Department alleges that KuCoin, along with founders Chun Gan and Ke Tang, concealed the exchange’s presence in the U.S. in an attempt to avoid complying with anti-money laundering and know-your-customer requirements. The Commodity Futures Trading Commission (CFTC) filed parallel charges, alleging that KuCoin has been operating as an illegal crypto derivatives exchange.

Office of the Comptroller of the Currency (OCC) Acting Comptroller Michael Hsu discussed fairness and effective compliance risk management in remarks at CBA LIVE 2024, hosted by the Consumer Bankers Association. Acting Comptroller Hsu discussed how banks can improve their ability to anticipate and adapt to emerging compliance risk issues by elevating and developing a strong internal sense of fairness.

Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra also delivered remarks at CBA LIVE. Director Chopra discussed competition in the credit card market, and why the CFPB is sharpening its focus and attention on the market.

The OCC released its fourth quarter 2023 Quarterly Report on Bank Trading and Derivatives Activities. The report found cumulative trading revenue of U.S. commercial banks and savings associations of $11.6 billion in the fourth quarter of 2023. The fourth quarter trading revenue was $1.6 billion, or 11.8 percent, less than in the previous quarter and $2 billion, or 20.4 percent, more than a year earlier.

The CFPB issued a new circular warning remittance transfer providers that false advertising about the cost or speed of sending a remittance transfer can violate federal law. The circular highlights several marketing practices relating to sending international money transfers that may violate the Consumer Financial Protection Act’s (CFPA) prohibition on deceptive acts or practices. This prohibition is enforced by the CFPB, states, and other regulators. Guidance in the circular applies both to traditional providers of international money transfers and to “digital wallets” that offer the capability to send money internationally from the United States.

The Federal Trade Commission (FTC) and other member agencies of the International Competition Network (ICN) jointly issued a statement about how regulatory agencies can increase their tech capacity to keep pace with the increasing use of technology across industries.

Separately, a number of U.S. federal and state agencies, including the FTC and CFPB, also released agency-specific action statements on tech capacity. These statements reflect concrete actions to increase tech capacity, including actively hiring technologists, which will help the agencies enforce existing laws and design remedies that work for consumers, workers, small businesses, and others.

The Securities and Exchange Commission (SEC) announced that it is seeking five candidates for appointment to the Investor Advisory Committee. The Committee was established under the Dodd-Frank Wall Street Reform and Consumer Protection Act to advise the Commission, protect investor interests and promote the integrity of the securities marketplace. Members of the public are encouraged to express their interest in serving on the Committee.

The SEC adopted amendments to the rule permitting certain internet investment advisers to register with the Commission.  The amendments will require an investment adviser relying on the internet adviser exemption to have an operational interactive website through which the adviser provides digital investment advisory services on an ongoing basis to more than one client. The amendments will also require an internet investment adviser to provide advice to all of its clients exclusively through an operational interactive website.

Read SEC Chair Gary Gensler’s statement here.

Judge Katherine Polk Failla of the U.S. District Court for the Southern District of New York, who is presiding over the SEC’s lawsuit against Coinbase, published an Opinion and Order, concluding that the SEC’s “well-pleaded allegations . . . plausibly support the SEC’s claim that Coinbase operated as an unregistered intermediary of securities,” and “the SEC adequately alleges that Coinbase, through its Staking Program, engaged in the unregistered offer and sale of securities.” The court noted, however, that Coinbase is “entitled to dismissal of the claim that Coinbase acts as an unregistered broker by making its Wallet application available to customers.” Thus, part of the SEC’s lawsuit against Coinbase will proceed.  

The National Credit Union Administration (NCUA) released its 2023 Annual Report, highlighting the agency’s activities, policy initiatives, and accomplishments for the past year. The NCUA’s most significant initiatives in 2023 are highlighted in the report and grouped into four categories: responding to economic headwinds; advancing financial security, economic equity, and allyship; maintaining cyber resiliency; and investing in employees.

Following Prometheum’s announcement that its subsidiary, Prometheum Capital, will provide custody services for ether (ETH), Republicans on the House Financial Services Committee and House Committee on Agriculture, led by Chairmen Patrick McHenry (NC-10) and Glenn “GT” Thompson (PA-15) and Reps. French Hill (AR-02), Dusty Johnson (R-SD), Tom Emmer (MN-06), and Warren Davidson (OH-08), sent a letter to SEC Chair Gary Gensler. The lawmakers are demanding that the SEC clarify its position with respect to a Special Purpose Broker Dealer’s ability to custody non-security digital assets, the SEC’s willingness to address SPBD non-compliance, the regulatory classification of ETH, and the SEC’s position regarding Prometheum’s announcement.

The American Fintech Council (AFC), American Financial Services Association (AFSA), and the National Association of Industrial Bankers (NAIB) filed a lawsuit in federal court challenging a new Colorado statute that they allege violates federal law by imposing interest-rate and fee caps on loans made to Colorado residents by state-chartered banks, including banks outside Colorado. The new law, HB23-1229, is scheduled to take effect on July 1, 2024 and was enacted as part of a campaign to curb predatory lending. 

The Federal Deposit Insurance Corporation (FDIC) Board of Directors proposed revisions to the Statement of Policy (revised SOP) on Bank Merger Transactions. The revised SOP will be published in the Federal Register with a 60-day comment period. The revised SOP updates the FDIC’s policies and expectations related to the evaluation of bank merger transactions.

FDIC Chairman Martin Gruenberg delivered a statement supporting the proposed revisions and stating that they would update, strengthen, and clarify the FDIC’s approach to evaluating mergers under the Bank Merger Act. 

FDIC Vice Chairman Travis Hill delivered a statement agreeing that the merger approval process needs to be reevaluated and refreshed, but arguing that the SOP moves in the wrong direction. Vice Chairman Hill stated that the SOP has the potential to make the process longer, more difficult, and less predictable. He stated that he will vote against the proposed SOP.

FDIC Board Director Jonathan McKernan issued a statement welcoming a proposal to update the SOP on bank mergers, but stating that he is unable to support the proposal “because it reflects and would implement a bias against bank mergers that is bad policy and contrary to law.” 

OCC Acting Comptroller Michael Hsu, a member of the FDIC Board of Directors, issued a statement at the FDIC board meeting stating that he supports the proposed statement of policy and encouraging stakeholders to provide comments.

Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra, another member of the FDIC Board of Directors, delivered remarks at the Peterson Institute for International Economics Event on bank merger review. In his remarks, he stated that the FDIC’s proposed Bank Merger Act Policy Statement would bring analytical rigor to merger review and better align the agency’s framework with the statute. 

Need to catch up on what happened last week? Check out our March 22nd End of Week Wrap Up here