Weekly Roundup

Bitcoin ETF Approval: The SEC on Wednesday approved the sale of ETFs that hold bitcoin, paving the way for the first U.S. bitcoin ETFs to be sold to the public. The approval applies to 11 applications from a host of major asset managers, who are expected to start trading soon. Despite signing off on the approval, SEC Chair Gary Gensleremphasized the risks associated with bitcoin and several of the agency’s commissioners opposed the authorization due to investor protection concerns.

MMI Leads Charge Against Exchange Volume Discounts Ban: In a comment letter submitted to the SEC this week, the Modern Markets Initiative (MMI) requested that the commission retract a proposal that the agency published this past fall banning brokerages from offering exchange volume discounts. Specifically, MMI, along with a host of other industry stakeholders, argues that the proposal does not “demonstrate through data that the problem is real and not conjecture” and fails to “quantify the Proposal’s costs and benefits.” Additionally, the organization’s letter states that this new regulation could erode market quality and harm the smaller brokerages that it aims to help. MMI and the other signatories put forth several alternative solutions, including requiring exchanges to disclose more details about their volume-discount programs to address perceived gaps in empirical analysis.

Retail Investor Retention: A study released by eToro this week stated that 84% of U.S. retail investors believe they are taking the right amount of investment risk or should be taking on more. Specifically, the report highlighted that key lessons learned from past economic challenges and low unemployment rates have contributed to more retail investors remaining engaged in the market. The accessibility of investment education resources and digital trading tools has also empowered retail investors to employ a number of diverse techniques, including fundamental research, technical analysis, and passive investing, to remain properly engaged with developments throughout today’s markets.

Predictive Tech Concerns: With the SEC proposing a new rule last year to ban brokers and investment advisers from using predictive technologies unless they eliminate all potential conflicts of interest, numerous industry observers have stated their opposition to this new regulation. Specifically, these experts argue that the proposal unfairly lumps retail and institutional investors together, and while they do not deny that the complete elimination of conflicts in business transactions is possible, they maintain that any new regulations must seek to focus on disclosure and mitigation rather than defaulting to outright bans.

Rising Crypto Fines: Crypto and the fintech sectors faced higher fines than the entire traditional financial industry last year, surpassing a total of $5.8 billion in penalties for deficiencies in customer checks, anti-money laundering controls, and other financial criminal issues. This amount surpassed the $835 million paid by traditional financial services groups this past year, which marked the lowest level in a decade. The surge in fines against crypto and payments providers indicates increased scrutiny and enforcement within these sectors, which has led to a number of sector experts predicting that fines will continue to increase in the years ahead.

Nasdaq Enforcement Leans Into AI: Nasdaq announced at this week’s Consumer Technology Association conference that the organization is increasing its level of investment in technology to combat financial crime, leveraging artificial intelligence to enhance its anti-crime capabilities by predicting and expediting the identification of criminal behavior.

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

  • MMI CEO, Kirsten Wegner, hosted a “Lunch and Learn” this past Tuesday with leading securities enforcement defense specialist Fuad Rana. Among a host of pressing sector topics, they discussed the SEC’s 2024 regulatory agenda and potential changes to Section 605.

  • Kristin Smith, CEO of Blockchain Association, responded forcefully this week to U.S. Senator Elizabeth Warren’s (D-MA) criticism of companies’ tendency to hire professionals departing from public sector roles. “After leaving government, these public servants could have chosen from myriad, well-deserved professional opportunities. But they were drawn to work in the emerging digital asset industry because they value freedom and creativity,” said Smith.