Weekly Roundup

Government Shutdown Update: The U.S. government has until tomorrow at midnight to prevent a partial shutdown. The funding dispute revolves around a small portion of the U.S. budget, with House Republicans demanding further spending cuts and immigration-related legislation. If not resolved by the deadline, this will cause thousands of federal workers to be furloughed and multiple services to be put on pause.

Equity Market Structure Review: 16 Democrats and 16 Republicans sent a bipartisan letter to SEC Chair Gensler calling for incremental review of equity market structure proposals, beginning with Section 605 disclosure of data provisions.

SEC Oversight Hearing: The House Financial Services Committee hearing, at which SEC Chair Gensler testified, discussed issues including the impact of a government shutdown on the SEC, need for incremental review of market structure, promotion of competition, AI review, codification of insider trading case law, and regulatory clarity for crypto, among other issues.

ETF Applications: The SEC has extended the deadlines for responding to spot bitcoin ETF applications by Ark Investment Management and Global X. These extensions come as Congress faces budget negotiation challenges, raising the possibility of a government shutdown. Ark Investment Management will now have to wait until January 10 for the SEC’s response while Global X will wait for its November 21 deadline.

Potential Binance Crash: Binance, once the dominant force in the cryptocurrency exchange space, is facing a tumultuous period marked by the departure of numerous senior executives and layoffs, all in response to looming enforcement actions by U.S. agencies. This shift brings concerns about liquidity and price volatility if Binance were to collapse. While the exchange continues to grapple with regulatory challenges, CEO Changpeng Zhao remains defiant but is reportedly bringing in new lawyers to handle the ongoing DOJ case.

Wall Street WhatsApp Probe: The SEC is reportedly finalizing settlements with approximately two dozen Wall Street firms to address investigations into record-keeping deficiencies related to their use of unapproved messaging apps, including WhatsApp. These settlements would require the firms to pay fines, admit wrongdoing, and commit to rectifying the lapses by hiring independent consultants to revamp their record-keeping programs. The SEC is expected to announce some of these settlements before its fiscal year-end on September 30.

Executive Order Leak: A recent White House leak suggests that President Joe Biden may issue an executive order on AI, sparking concerns within the crypto community. The order, as stated in a Semafor report, would force companies like Microsoft, Google, and Amazon to disclose excessive customer purchases of computing resources. This uncertainty highlights the challenges ahead for crypto and its relationship with evolving government policies.

AI Prevents Financial Crimes: The global battle against financial fraud and money laundering is seeing a significant shift towards the use of Generative AI tools. As concerns grow about the rising risks of financial crime, with cybersecurity and data breaches being major drivers, a substantial number of executives and risk professionals are turning to AI and machine learning to enhance their financial crime compliance efforts. Innovative AI tools like Lucinity’s Luci, Deutsche Bank’s Black Forest, and Quantexa’s software are revolutionizing the detection and prevention of financial fraud, helping streamline investigations and compliance efforts.

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

  • Kirsten Wegner, Modern Markets Initiative CEO, published an op-ed in Traders Magazine titled, “When a Regulatory Last Resort Becomes the Only Resort for Market Participants.” The piece spotlights SEC Chair Gensler’s regulatory agenda and her column argues for an incremental, data-driven approach to equity market structure changes that include industry feedback.

  • Hal Scott, Professor of International Financial Systems at Harvard Law School, published a study that 17% of SEC Chair Gensler’s proposals are mandated by Congress, verses 59% of former Democrat SEC Chair Mary Jo White.

  • SEC Chair Gary Gensler reiterated his concerns about the cryptocurrency industry during his congressional testimony before the House Financial Services Committee, highlighting the mismanagement of customer assets by crypto companies. The testimony delved into various issues, including a potential government shutdown and the SEC’s focus on climate-related matters.