Weekly Roundup

SEC Appeals Ripple Decision: The SEC announced their intention to appeal a U.S. District Court’s decision in their suit against Ripple Labs. In a ruling that industry observers believe would hamstring the agency’s ability to police the crypto industry, Judge Analisa Torres of the Southern District of New York stated that Ripple’s sale of their XRP digital token on public exchanges complied with current securities regulations. It is currently unclear when Judge Torres’ decision on whether the SEC’s appeal can move forward will be made public.

IRS’s New Crypto Rules: The Internal Revenue Service (IRS) this week issued its first formal guidelines for the taxation of crypto staking rewards, marking a significant development in the ongoing debate surrounding regulations on this kind of revenue stream. The IRS’s proposal underscores that staking rewards are taxable at the point when individuals gain control over how they can sell, exchange, or dispose of their tokens. This guidance differs from prior agency approaches that focused on taxpayers reporting rewards upon receipt or whenever their tokens were sold.

PayPal’s Stablecoin: PayPal became the first major financial technology firm to launch their own stablecoin forpayments and transfers. PayPal’s stablecoin, backed by U.S. dollar deposits and short-term U.S. Treasuries, will be issued by Paxos Trust Co., and will be gradually rolled out to the American marketplace. This announcement comes as regulators and policymakers both at home and abroad are seeking to establish rules for regulating digital currencies.

SEC & CFTC Issue Wall St. Texting Fines: Nine major Wall Street institutions, including Wells Fargo, BNP Paribas, and Société Générale, have been fined $549 million by SEC and Commodity Futures Trading Commission (CFTC) regulators for their employees’ use of personal messaging apps, such as WhatsApp and Signal, to discuss transactions. These communications violated current record-keeping laws, and the penalties are the result of a two-year enforcement probe into these “off channel” professional communications. Sector experts view the fines as regulators’ efforts to bolster compliance throughout the financial services industry.

MarketAxess Acquires Pragma: MarketAxess, a fixed-income electronic trading platform, announced this week that they will be acquiring Pragma, a multi-asset algorithmic trading provider, before the end of Q4. With Pragma’s expertise in FX algorithms, industry observers believe that this transaction is an opportunity to offer FX hedging solutions to an expanded pool of emerging market clients.

Fed Crypto Oversite: The U.S. Federal Reserve has unveiled a new program to oversee private financial institutions’ crypto activities that reinforces the central bank’s existing policies and clarifies expectations for industry stakeholders. The program states that banks under the Fed’s authority must obtain approval before engaging in activities involving digital assets, specifically providing guidelines on pre-approvals for dealing with stablecoins to ensure that banks can handle these activities securely and in compliance with current regulations. The program aims to strike a balance between fostering financial innovation and ensuring robust oversight.

AI Deepfakes: The development of AI-generated digital avatars has raised concerns about identity verification on various cryptocurrency exchanges. HeyGen’s AI technology, for instance, can create realistic digital avatars that mimic facial expressions, voice, and speech patterns, potentially allowing bad actors to use this technology as part of hacking schemes. This concern has led Changpeng Zhao, CEO of Binance, to warn the platform’s users not to trust video verifications due to AI-generated avatars potentially being used to deceive consumers.

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

  • Annabel Ayles, co-founder and chief operating officer of Evident, spoke with Axios about the pace at which many of America’s most prominent banks are infusing AI technology into their daily operations. With many industry experts agreeing that Wells Fargo is the current industry leader on this widespread implementation, the vast majority of the nation’s big banks are investing a significant amount of resources in this area in an effort to not be left behind by their competition. “Maintaining a ‘wait and see’ approach to AI innovation looks increasingly risky given the pace at which the leaders are accelerating away from the rest of the field,” Ayles said.

  • David Rubenstein, co-founder of the Carlyle Group, said this week that Bitcoin’s longevity is assured due to increasing institutional interest. In an interview with Bloomberg TV, Rubenstein highlighted BlackRock’s pursuit of a spot bitcoin ETF, along with increasing global demand for a currency beyond governmental control, as his primary data points for this opinion. “A lot of people around the world want to be able to trade in a currency that their government can’t know what they have, and they want to be able to move it around rightly or wrongly and so I don’t think bitcoin is going away,” Rubenstein said.