Weekly Roundup

Artificial Intelligence: Adena Friedman, CEO of NASDAQ, spoke about fintech innovation helping solve social issues, and the rise of AI in helping fighting financial crimes.

SEC X Account Hack Fallout: SEC Chair Gary Gensler this week addressed the cyber-attack that was launched upon the agency’s X (formerly Twitter) account, stating that there is currently “no evidence” that the unauthorized access on January 9 breached other department systems. The Commission, however, is currently evaluating the hack’s potential impact on other federal agencies, crypto investors, and the marketplaces’ at-large, emphasizing that it is working with law enforcement, including the FBI and the Department of Homeland Security, as part of its investigation.

Crypto Tax Rules: Following a recent U.S. Treasury Department-led markup of the Infrastructure Investment and Jobs Act, the IRS will not enforce the commercial reporting of cryptocurrency transactions above $10,000 until a regulatory framework is established. While opponents of this decision harbor concerns regarding current reporting requirements, numerous digital asset sector experts have hailed this decision as a positive step forward for the industry.

JPMorgan Fine: JPMorgan Chase is set to pay an $18 million fine to resolve a civil penalty levied by the SEC for violating whistleblower protection rules. Specifically, the bank ran afoul of current regulations by requesting retail clients to sign confidentiality agreements if they were issued a line of credit exceeding $1,000. SEC observers note that this action serves as a warning to companies throughout the banking industry to remove language in employee agreements that would in any way discourage whistleblowers from coming forward.

Gensler’s AI Fears: SEC Chair Gary Gensler expressed concern this week over the potential fragility of the financial system if there is a centralized market dominated by only a few AI models. Specifically, he drew parallels to the cloud provider and search engine markets, emphasizing the risk of a “monoculture” in finance in which numerous actors only rely on a singular central data or choice model. Gensler stressed the importance of maintaining diversity in these areas, urging regulators in the U.S. and across the globe to consider this approach.

SEC vs. Coinbase: A federal judge this past Wednesday expressed skepticism over the SEC’s attempt to regulate Coinbase, specifically questioning the broad reach of the Commission’s applied standards to the crypto industry. Coinbase is seeking dismissal of the agency’s civil lawsuit that alleges the company lists securities and operates its wallet service and staking programs unlawfully. The judge is expected to render a ruling in the coming months, and the outcome could shape the crypto regulatory landscape. 

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

  • Kirsten Wegner, CEO of MMI, published an op-ed on the Consolidated Audit Trail in Traders Magazine noting the CAT “has a budget that dwarfs that of many federal agencies,” and noting pending litigation in the 11th circuit.

  • Brad Garlinghouse, CEO of Ripple, spoke at the World Economic Forum this week about SEC Chair Gary Gensler’s aggressive crypto sector regulatory approach. “I do think the chair of the SEC, Gary Gensler, is a political liability in the United States. And I think he’s not acting in the interests of the citizenry, he’s not acting in the interests of the long-term growth of the economy, and I don’t understand it,” said Garlinghouse. “I think at some point there will be a new chair of the SEC, and I think that will be a good thing for the American people.”

Note: The Fintech Friday newsletter will be going on temporary hiatus. Please continue to follow MMI’s social media channels for all our latest updates