Weekly Roundup

SEC Targets AI: SEC Chair Gary Gensler proposed a set of new rules this week focused on potential conflicts of interest surrounding AI on Wall Street. The proposal is part of a wider initiative by the agency with a stated goal of protecting investors from AI generated stock picks and “meme stocks,” such as the AI and bot-driven GameStop phenomenon in early 2021. Members of the public will have a two-month window to comment on the potential new rules before they are voted on by the agency’s commissioners.

DOJ Probing Binance: In recent weeks, the Department of Justice has launched an investigation into Binance and Binance.US stemming from SEC-raised allegations that Binance’s Chief Executive, Changpeng Zhao, engaged in wash trading to inflate trading volumes on the exchange. Since the SEC filed a lawsuit against the crypto platform last month, Binance.US’s market share has dropped to approximately 1%. Binance.US denies the charges and claims the allegations are based on a “fundamental misunderstanding of the facts and misapplication of the relevant law.”

SEC Appealing Ripple Decision: The SEC is reportedly weighing whether to file an appeal against a federal judge’s ruling from earlier this month regarding the legality of selling XRP on secondary markets. While the decision stated that Ripple Labs’ XRP strategy did not violate securities laws, insiders say that the SEC believes this ruling was “wrongfully decided” due to Ripple potentially running afoul of current agency regulations by directly selling digital currencies to institutional investors. Industry experts anticipate that the SEC will take more time to determine next steps.

HFSC Advances Crypto Bill: This week, the House Financial Services Committee (HFSC) voted to advance a bipartisan bill that would develop a regulatory framework for the cryptocurrency sector. Specifically, the measure would grant the SEC and the FTC oversight over the industry and is aimed at preventing potentially valuable crypto firms from moving their operations overseas to secure more widespread legitimacy. Several key amendments, including language targeted at malicious online actors, are expected to be added before the bill is voted on by the full House.

Debate on Stablecoin Bill: Negotiations on a stable coin markup in House Financial Services Committee stalled after failure to build political traction, including with White House negotiators

FedNow Rollout: The Federal Reserve this week  introduced FedNow, a real-time payments service aimed at speeding up processing times and providing round-the-clock settlements throughout the year. FedNow will attempt to compete with RTP, a private-sector system intended for federally insured institutions and plans to make its service available to various eligible depository institutions. Despite mixed opinions amongst industry observers, the introduction of FedNow represents one of the most significant shifts in recent U.S. payments policy.

Worldcoin Launch: OpenAI’s Sam Altman this week announced the launch of Worldcoin,  a cryptocurrency and digital ID project that will deploy eye scanning technology to verify users’ identity before allowing them to make payments, purchases, and transfers. The company stated that the new initiative could help quell concerns regarding if certain AI systems could potentially make it harder to determine if a user is real or the product of an algorithm. Worldcoin will not yet be made available to U.S.-based users.

SEC vs. Musk: Elon Musk is planning to appeal the SEC’s recent decision to not revisit a fraud  case involving a 2018 tweet from his Twitter account that potentially violated SEC investor transparency standards to the US Supreme Court. Earlier this month, a three-judge panel rejected his claim that the SEC overstepped their authority to conduct investigations when they delved into his use of Twitter.

In the Mix: This Week’s Top FinTech Thought Leader

  • Kevin McPartland, Head of Market Structure and Technology Research at Coalition Greenwich, commented on a study that his organization, alongside Financial Information’s Six Group, conducted that found an increasing need among retail investors for expanded access to real time market data. His report stated that this desire among market participants for information that can help them make more informed decisions regarding their portfolio activity is pushing leading financial institutions to increase their level of technological investment in this key area. “As organizations navigate the changing market data landscape, a focus on data quality, leveraging cloud infrastructure and staying attuned to shifting consumer demands will be crucial to unlocking the full potential of market data within financial markets,” McPartland said.

  • Natasha Vij Greiner, the National Associate Director of the Investment Adviser/Investment Company examination program, and Keith E. Cassidy, the National Associate Director of the Division’s Technology Controls Program have been named interim Acting Co-Directors of the SEC’s Division of Examinations. This decision comes after Richard Best, the current Division Director, announced he will be taking an extended medical leave. “I thank Natasha and Keith for stepping in on an interim basis to lead the Division of Examinations. They are both strong leaders who have earned the respect of their colleagues throughout the agency,” said SEC Chair Gary Gensler.