Regulatory Developments
Financial Stability Oversight Council Releases Report on Digital Asset Financial Stability Risks and Regulation
On October 3, the FSOC released its Report on Digital Asset Financial Stability Risks and Regulation (Report), which reviews the specific financial stability risks and regulatory gaps posed by various types of digital assets and provides recommendations to address such risks. The Report concluded that crypto-asset activities could pose risks to the stability of the U.S. financial system and emphasized the importance of appropriate regulation, including enforcement of existing laws. The Report includes the following recommendations to address regulatory gaps in the regulation of crypto-asset activities: 1) passing legislation providing for rulemaking authority for federal financial regulators over the spot market for crypto-assets that are not securities; 2) addressing regulatory arbitrage including coordination and legislation to address risks posed by stablecoins, provide visibility into the activities of all of the affiliates and subsidiaries of crypto-asset entities, and establish regulation of service providers; and 3) studying potential vertical integration of crypto-asset firms.
“This report provides a strong foundation for policymakers as we work to mitigate the financial stability risks of digital assets while realizing the potential benefits of innovation.”
- Secretary of the Treasury Janet L. Yellen
Financial Stability Oversight Council Establishes New Climate-Related Financial Risk Advisory Committee
On October 3, the FSOC established the Climate-Related Financial Risk Advisory Committee (CFRAC). The plan to establish the CFRAC was announced in FSOC’s 2021 Report on Climate-Related Financial Risk in an effort to help FSOC gather information on and analysis of climate-related financial risks from a broad array of stakeholders, and to support regulators’ efforts to translate climate-related risks into economic and financial impacts. CFRAC consists of one government observer and 20 members, and includes stakeholders from a wide range of backgrounds in the financial services industry, non-governmental research institutions, climate-related data and analytics, non-profit organizations, and academia. Names of the initial slate of CFRAC members can be found in the press release. The first meeting of CFRAC is anticipated to take place in early 2023.
FinCEN Issued Final Rule for Beneficial Ownership Reporting Under the Corporate Transparency Act
On September 29, FinCEN issued a final rule for beneficial ownership reporting under the Corporate Transparency Act. The rule is effective January 1, 2024. Reporting companies created or registered before January 1, 2024, will have one year (until January 1, 2025) to file their initial reports, while reporting companies created or registered after January 1, 2024, will have 30 days after creation or registration to file their initial reports. Goodwin will be issuing a client alert discussing this rule in the near future.
Federal Reserve Board Finalizes Updates to the Board’s Rule Concerning Debit Card Transactions
On October 3, the Federal Reserve announced that it had finalized updates to its rule amending Regulation II regarding debit card transactions (Final Rule). The Final Rule is substantially the same as the rule proposed by the Federal Reserve last year and clarifies 1) that each debit card transaction must be able to be processed on at least two unaffiliated payment card networks and 2) that this requirement also applies to “card-not-present” transactions, such as online payments. The Federal Reserve noted that the Final Rule does not revise interchange fee requirements and that it will continue to review such requirements in light of recently collected data. The Final Rule goes into effect on July 1, 2023.
Banking Agencies Announce Forthcoming Resolution Plan Guidance for Large Banks
On September 30, the FDIC and the Federal Reserve jointly announced that they anticipate issuing guidance that will help certain large banks further develop their resolution plans.
Required by the Dodd-Frank Act, resolution plans describe a financial company's strategy for rapid and orderly resolution under bankruptcy in the event of financial distress or failure.
The forthcoming guidance would cover Category II and Category III banking organizations, which are organizations with more than $250 billion in total assets but that are not global systemically important. Such organizations have not previously received guidance on resolution plans. Public comment on the guidance will be sought and considered before it is finalized.
Litigation & Enforcement
CFTC Attempts to Extend Liability to DAO Participants
In a first of its kind enforcement action, the Commodity Futures Trading Commission (CFTC) is attempting to hold participating members of a decentralized autonomous organization liable for alleged violations of the Commodity Exchange Actand CFTC regulations.
Read the client alert for a summary of the enforcement action and how it could impact DeFi and greater Web3 communities.
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Editors
Samantha M. Kirby
William McCurdy
Contributors
Serene Qandil
Ximeng (Sammy) Tang
Jiabao (Eva) Xu