Developments in the Laws Affecting Electronic

Payments and Financial Services

Kierner, Tom 1 ; Middlebrook, Stephen T 2 ; Hughes, Sarah Jane 3 1 associate at Womble Bond
Dickinson (US). Prior to that, he was assistant general counsel at a payments company 2 counsel to
Womble Bond Dickinson (US). Prior to that, he was the general counsel at two fintech companies and
senior counsel at the U.S. Department of the Treasury. He is co-chair of the Electronic Payments and
Financial Services Subcommittee of the ABA Business Law Section's Cyberspace Law Committee 3
University Scholar and Fellow in Commercial Law at Indiana University's Maurer School of Law. She is
co-chair of the Electronic Payments and Financial Services Subcommittee of the ABA Business Law
Section's Cyberspace Law Committee . The Business Lawyer ; Chicago  Tomo 75, N.º 1,  (Winter
2019/2020): 1695-1707.

Enlace de documentos de ProQuest

RESUMEN (ENGLISH)
The document reiterates the SEC's reliance on the Howey test under which an investment contract exists when
there is (1) an investment of money in (2) a common enterprise with (3) a reasonable expectation of profits to be
(4) derived from the efforts of others.2 The framework also identifies characteristics of a digital asset that would
suggest that it is not an investment contract, including the fact that the digital asset can immediately be used for
its intended purpose, that the underlying distributed ledger technology is already fully developed and operational,
that the token is designed to meet the needs of users rather than speculators, and that the prospects for the digital
assets' appreciation in value are limited.3 The SEC also noted that factors laid out in the framework are not
intended to be exhaustive and encouraged market participants to seek the advice of securities counsel and to
engage with agency staff.4 B. FinCEN Reissues Prior Guidance on Convertible Virtual Currencies and Includes
Enforcement Actions in One Publication, and Issues New Advisory on Illicit Crypto Activity On May 9, 2019, FinCEN
issued guidance ("2019 CVC Guidance")5 to financial institutions regarding business models involving convertible
virtual currencies ("CVC"). The 2019 CVC Guidance restates and explains guidance that FinCEN has issued since
its original CVC guidance in March 2013.11 The new guidance document also covers prior administrative rulings
and applicable FinCEN regulations.12 This guidance defines various "business models" that may give rise to
coverage by FinCEN's 2011 rule relating to money services businesses,13 provides information on CVC
transactions that may be exempt from FinCEN's definition of "money transmission,"14 and charts all of FinCEN's
guidance and administrative rulings that reference CVCs.15 Of special significance to emerging forms of virtual
currency is the guidance's discussion of "anonymity-enhanced" CVC transactions, specifically including those
transactions that either are denominated (1) "in regular types of CVC, but structured to conceal information
otherwise generally available through the CVC's native distributed public ledger," or (2) "in types of CVC specifically
engineered to prevent their tracing through distributed public ledgers (also called privacy coins). "20 This Advisory
discusses risks posed by CVCs,21 contains a list of "red flags" to assist financial institutions in identifying
customers and transactions for additional scrutiny and reporting,22 and describes specific law enforcement
actions.23 C.OFAC Actions Pertaining to Virtual Currencies and Sanctions Designations of Bitcoin Addresses The
U.S. Treasury Department's Office of Foreign Assets Control ("OFAC") implements and enforces federal statutes
and executive orders that prohibit U.S. persons from engaging in transactions with individuals, organizations,
certain governments, or with individuals, organizations, governments or purposes not covered by specific
"licenses" that federal agencies may issue for transactions. The app gathers information about donors-including
credit card, debit card, and bank account information-and shares that data with a payment processor.36 When a
consumer authorizes a donation, Givelify notifies the payment processor who initiates the payment, which is then

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deposited in the charity's bank account.37 The PDBS deemed Givelify to be engaged in the business of money
transmission because its software facilitated funds transfers even though it never held or possessed any
money.38 The appellate court reversed, holding that under the terms of the statute, merely handling payment
information was not money transmission: "Although Petitioner's software application can be deemed to have
acquired and 'transmitted' information vital to the donative transactions to [the payment processor], by no means
was Petitioner 'transmitting money' itself, or transmitting some other 'method for the payment' of the donation,
'from one person or place to another.

TEXTO COMPLETO
I.Introduction
Federal and state developments affecting e-payments and financial services between June 1, 2018, and May 31,
2019, as in recent years, exceeded the space allowed for this survey. We have chosen to feature continuing
regulatory efforts, including new guidance and innovations in cryptocurrencies as payments methods or as
tradable "digital assets," and enforcement actions related to cryptocurrencies and to providers and users of
cryptocurrencies. This survey also identifies guidance and enforcement actions that relate to providers of other
types of financial products or services. Part II evaluates developments relating to cryptocurrencies, both as
payment products and otherwise as "digital assets" or "tokens" offered to the public that may meet requirements
for "investment contracts" that the United States regulates as "securities." Part III covers developments for other
payment and financial products. Part IV offers conclusions and predictions of "hot topics" for the coming survey
year.
II.Federal Developments Affecting Providers of Cryptocurrencies, "Digital Assets," or "Tokens"
During the survey period, federal and state regulatory and law enforcement agencies issued guidance and took
civil and criminal actions against cryptocurrency providers and users.
A. SEC Publishes Framework for "Investment Contract" Analysis of Digital Assets
On April 3, 2019, the Securities and Exchange Commission ("SEC") published its Framework for "Investment
Contract" Analysis of Digital Assets,1 articulating the factors it will consider when determining whether a digital
asset (sometimes called a "token") constitutes an "investment contract" under federal securities law. The
document reiterates the SEC's reliance on the Howey test under which an investment contract exists when there is
(1) an investment of money in (2) a common enterprise with (3) a reasonable expectation of profits to be (4)
derived from the efforts of others.2 The framework also identifies characteristics of a digital asset that would
suggest that it is not an investment contract, including the fact that the digital asset can immediately be used for
its intended purpose, that the underlying distributed ledger technology is already fully developed and operational,
that the token is designed to meet the needs of users rather than speculators, and that the prospects for the digital
assets' appreciation in value are limited.3 The SEC also noted that factors laid out in the framework are not
intended to be exhaustive and encouraged market participants to seek the advice of securities counsel and to
engage with agency staff.4
B. FinCEN Reissues Prior Guidance on Convertible Virtual Currencies and Includes Enforcement Actions in One
Publication, and Issues New Advisory on Illicit Crypto Activity
On May 9, 2019, FinCEN issued guidance ("2019 CVC Guidance")5 to financial institutions regarding business
models involving convertible virtual currencies ("CVC"). This guidance explains how FinCEN's "money services
business" registration requirements6 apply to "domestic and foreign-located . . . money transmitters doing
business in whole or in substantial part within the United States, even if the foreign-located entity has no physical
presence in the United States."7 "Money services businesses"8 required to register with FinCEN also must comply
with FinCEN's Bank Secrecy Act regulations, including having written anti-money-laundering compliance
programs9 and customer-identification programs,10 among other things. The 2019 CVC Guidance restates and
explains guidance that FinCEN has issued since its original CVC guidance in March 2013.11 The new guidance
document also covers prior administrative rulings and applicable FinCEN regulations.12 This guidance defines

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various "business models" that may give rise to coverage by FinCEN's 2011 rule relating to money services
businesses,13 provides information on CVC transactions that may be exempt from FinCEN's definition of "money
transmission,"14 and charts all of FinCEN's guidance and administrative rulings that reference CVCs.15 Of special
significance to emerging forms of virtual currency is the guidance's discussion of "anonymity-enhanced" CVC
transactions, specifically including those transactions that either are denominated (1) "in regular types of CVC, but
structured to conceal information otherwise generally available through the CVC's native distributed public ledger,"
or (2) "in types of CVC specifically engineered to prevent their tracing through distributed public ledgers (also
called privacy coins)."16
On May 9, 2019, FinCEN also issued an Advisory on Illicit Activity Involving Convertible Virtual Currency 11 FinCEN
explains that financial institutions may use this advisory to help identify and report suspicious activity related to
how criminals and "other bad actors exploit CVCs for money laundering, sanctions evasion, and other illicit
financing purposes."18 FinCEN highlighted its concerns about activities including "darknet marketplaces, peer-to-
peer . . . exchangers, foreign-located Money Service Businesses . . . , and CVC kiosks."19 FinCEN also explains that
its Advisory applies to "any decentralized ledger-based currency or CVC."20 This Advisory discusses risks posed by
CVCs,21 contains a list of "red flags" to assist financial institutions in identifying customers and transactions for
additional scrutiny and reporting,22 and describes specific law enforcement actions.23
C.OFAC Actions Pertaining to Virtual Currencies and Sanctions Designations of Bitcoin Addresses
The U.S. Treasury Department's Office of Foreign Assets Control ("OFAC") implements and enforces federal
statutes and executive orders that prohibit U.S. persons from engaging in transactions with individuals,
organizations, certain governments, or with individuals, organizations, governments or purposes not covered by
specific "licenses" that federal agencies may issue for transactions. During the survey period, oFAC used its
authorities in transactions involving cryptocurrencies, issuing new guidance, listing two iranian individuals and
their Bitcoin addresses as specially Designated Nationals ("sDNs") with whom no U.S. person may do business-
and one of its actions caused the Maduro government in Venezuela to file a complaint with the World Trade
Organization ("WTO").
OFAC has expanded its FAQ guidance on U.S. sanctions against persons using cryptocurrencies and other
electronic payments methods.24 The FAQs previously defined terms such as "virtual currency," "digital currency,"
"digital currency wallet," and "digital currency address."25 Additional guidance from June 6, 2018, and November
28, 2018 focuses on how oFAC lists digital currencyrelated addresses on the SDN List,26 methods to block digital
currency,27 and timing of reporting blocked digital currency to OFAC.28
on November 28, 2018, oFAC designated iran-based individuals as facilitators of malicious cyber activity-
specifically the "samsam" ransomware attacks involving more than 200 victims-and identified 7,000 Bitcoin
transactions the Iranians had handled since 20 1 3.29 OFAC added the two Iranians and their digital currency
addresses to the SDN List.30 This is the first and only such designation to the end of this survey period, but it
reveals that OFAC can identify by address cryptocurrencies that are being used for illicit purposes. OFAC's
designations of the individuals and their digital-currency addresses blocks all their property in the possession or
control of U.S. persons or within the United States or transiting through it.
On March 19, 2018, President Trump issued an Executive Order designating Venezuela's "Petro" cryptocurrency as
subject to U.S. economic sanctions.31 In response, in December 2018, the Maduro government filed a complaint
against the United States, formally a request for consultations, in the WTO.32 The request for consultations states
the basis for the complaint as "[d]iscriminatory coercive trade-restrictive measures with respect to transactions in
Venezuelan digital currency, adopted pursuant to Executive Orders 13808, 13827 and 13835" and cites to
provisions of the GATT and GATS implicated by the Executive Orders.33 We believe this is the first complaint to
the WTO against the United States involving U.S. sanctions programs. On March 14, 2019, Venezuela requested
appointment of a panel to hear its complaint,34 a step in the consultation process.
D.Courts and Regulators Clarify Application of State Money Transmitter Laws to Fintech Companies and Virtual
Currency Businesses

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1.Appeals Court Rejects Application of Pennsylvania Money Transmitter Act to Fintech
State money transmission statutes are old and geared to traditional over-thecounter money transmission services,
making them difficult to apply to more modern business practices. The Pennsylvania Department of Banking and
Securities ("PDBS"), nonetheless, interpreted its statutes to encompass Internet and mobile payments. In May
2019, however, a state appellate court disapproved of this expansion when it reversed a PDBS determination that
Givelify, LLC was engaged in money transmission without a license.35 Givelify offers a mobile app to churches and
other non-profit organizations that may be used to solicit donations from supporters. The app gathers information
about donors-including credit card, debit card, and bank account information-and shares that data with a payment
processor.36 When a consumer authorizes a donation, Givelify notifies the payment processor who initiates the
payment, which is then deposited in the charity's bank account.37 The PDBS deemed Givelify to be engaged in the
business of money transmission because its software facilitated funds transfers even though it never held or
possessed any money.38 The appellate court reversed, holding that under the terms of the statute, merely
handling payment information was not money transmission: "Although Petitioner's software application can be
deemed to have acquired and 'transmitted' information vital to the donative transactions to [the payment
processor], by no means was Petitioner 'transmitting money' itself, or transmitting some other 'method for the
payment' of the donation, 'from one person or place to another.'"39
This decision is a solid rebuke to state agencies that attempt to expand their interpretation of money transmission
statutes to include other activities, like acquiring and transmitting information, that may facilitate money
transmission but are not themselves money transmission. The Givelify decision should prove useful to a variety of
fintech companies that are working with banks, money transmitters, and other licensed entities to modernize
payments.
2.Florida Court Holds Bitcoin Is a Payment Instrument Under Florida's "Money Transmitter" Statute
On January 30, 2019, a Florida appeals court reinstated criminal charges of operating as an unlicensed money
transmitter against a man who sold Bitcoin for cash.40 Although acknowledging that the virtual currency does not
fall within the definition of "currency" found in the state's money transmission law, the court held Florida's statute
was still triggered because the defendant was selling "a medium of exchange, whether or not redeemable in
currency," which qualifies as a "payment instrument" covered by the law.41 The court rejected arguments that the
defendant should not be deemed a "money transmitter" because the transactions at issue did not involve
transmitting monetary value to a third party, noting that the words "to a third party" are not found in the statute.42
By removing the requirement that a transfer be made "to a third party," the court expands the application of
Florida's money transmission statute to virtual currency businesses and potentially other financial services
providers engaged in two-party transactions.
3. Pennsylvania Says, "Virtual Currency Exchanges" Are Not "Money Transmitters"
The PDBS issued guidance that virtual currency exchanges operating in the state do not need money transmitter
licenses because "virtual currency" is not "money" under Pennsylvania's statute and the exchanges do not handle
"fiat currency."43 The PDBS also stated that operators of virtual currency ATMs, which facilitate exchanges
between fiat and virtual currency, do not need licenses because there is no transmission to a third party.44
4. Texas Aligns with Pennsylvania, Except on "Stablecoins"
In early 2019, the Texas Department of Banking also excluded some virtual currencies from its "money transmitter"
statute,45 but carved out "stable coins" from its guidance.46 The Supervisory Memorandum explained that certain
stable coins will be treated as money or monetary value so that "money transmission" will occur by their transfer:
[Sjtablecoins that are pegged to sovereign currency may be considered a claim that can be converted into currency
and thus fall within the definition of money or monetary value under Finance Code 151.301(b)(3). In those
instances where the stablecoin is backed by a sovereign currency reserve and a redemption right exists to the
holder of the stablecoin, the holder has a claim to the sovereign backing the coin because the issuer has taken on
the obligation to provide sovereign currency in exchange for the stablecoin at a later time (upon the holder's
request).47

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Thus, Texas' position may signal a split of regulatory treatment between coins that cannot be redeemed as of right
for sovereign currencies, and those that can-with future implications that are hard to predict for the crypto
industry.
E.Class Action Litigation Over Card Issuers Classifying Cryptocurrency Purchases as Cash Advances
With the rising popularity of certain cryptocurrencies, consumers have attempted to purchase virtual currencies
using their debit and credit cards-with varying degrees of success. some card issuers have simply blocked
cryptocurrency purchases.48 Other card issuers have chosen to categorize cryptocurrency purchases as "cash
advances" subject to additional fees.49 The imposition of cash-advance fees has resulted in class action lawsuits
asserting violations of the Truth in Lending Act ("TILA") and other laws being filed against Chase Bank,50 Bank of
America,51 and State Farm Bank.52
in the State Farm case, plaintiffs alleged that, on multiple occasions, they paid for cryptocurrency using their State
Farm credit cards and those transactions were treated as standard purchases and appeared as such on monthly
statements. Beginning in February 2018, however, similar transactions were treated as cash advances and were
subjected to higher fees.53 Under the terms of the cardholder agreement, cash advances include "quasi-cash
transactions," which are defined as purchases of items "that are convertible to cash or similar cash-like
transactions [including] money orders, travelers checks, or foreign currency or tax payments."54 Cash advances
are assessed a per-transaction fee and are subject to a higher interest rate.55
Plaintiffs alleged that the change in how cryptocurrency purchases were treated violated various provisions of
TILA as well as the terms of the cardholder agreement.56 Defendants moved to dismiss. The court dismissed
claims that the bank failed to provide required notice of a change in terms, because it concluded that a change in
how the terms of an agreement are interpreted-that is, whether the purchase of cryptocurrency constitutes a
"quasi-cash transaction"-is not an actual change in terms.57
The court also dismissed claims that, if in fact the purchase of cryptocurrency was a "quasi-cash transaction," then
the bank improperly classified the preFebruary 2018 transactions as "purchases" on monthly statements. The
court held that the statements accurately reflected how the transactions were treated and applied to Plaintiffs'
account, and thus complied with TILA.58
With regard to claims that the bank's disclosures about "quasi-cash transactions" were not clear and conspicuous,
the court held that determining whether cryptocurrency was cash-like was a question of fact not properly resolved
in a motion to dismiss.59 Similarly, claims for breach of the cardholder agreement also turned on whether
cryptocurrency should properly be categorized as quasi-cash and, thus, were allowed to go forward.60
As the State Farm, Chase, and Bank of America cases all proceed to trial, the respective courts will have to struggle
with questions about the basic nature of cryptocurrencies. Although the ultimate conclusions in these matters will,
in some ways, be limited to the context of specific bank agreements and consumer financial statutes, the
analytical approach taken in these cases will be as influential as the contemporaneous statements about
cryptocurrency coming from regulators and legislators.
F.Actions Involving Activities of Bitfinex and Tether
On April 24, 2019, New York State's Attorney General obtained an ex parte order under the Martin Act,61 enjoining
iFinex Inc., the operator of the Bitfinex crypto trading platform, Tether Ltd., the issuer of the virtual currency tether,
and others from violations of disclosure provisions of the Martin Act, pertaining to securities and commodities.62
III.Developments Pertaining to Payroll Cards and Other Payment Methods
A. Payroll Card Litigation Continues in New York State
The surveys for 20 1 763 and 201864 discussed the payroll-card regulations promulgated by the New York
Department of Labor ("NY DOL"). As of May 31, 2019, the litigation challenging these regulations marches on. To
recap, in September 2016, the NY DOL issued regulations regarding the methods of wage payment, which included
regulating the use of payroll cards.65 The regulations were the most demanding in the country. In addition to
prohibiting a wide array of fee types, they prohibited employers from paying wages on a payroll debit card until
seven business days after the employee consented to being paid via payroll card.66 They also established

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demanding ATM access and language disclosure requirements.67
Global Cash Card, Inc. ("GCC"), a payroll card program manager, challenged the rules before the Industrial Board of
Appeals.68 The Board sided with GCC and revoked the rules. The NY DOL petitioned a New York court to review the
revocation, and the court annulled the Board's revocation.69 GCC appealed that decision, and the matter is
pending before the Third Judicial Department of the Supreme Court's Appellate Division.70
As a result of the ongoing litigation, the status of the payroll card regulation enforcement is unclear. GCC did not
move to stay the regulations pending litigation, and the NY DOL has not publicly opined on whether they intend to
enforce the regulations.
B. The FTC Initiated Enforcement Actions Involving Other Payments
The FTC settled claims against a few fintech companies in the last year. In the first set of actions, the FTC brought
claims against two payment intermediaries and their directors and officers, alleging they were facilitating
payments to merchants perpetrating frauds. In the second, the FTC brought an enforcement action against an
online consumer loan processor, alleging that some of its business practices were unfair.
1. The FTC's Enforcement Actions Against Payment Intermediaries
The FTC recently settled cases against AlliedWallet, Inc.71 and Priority Payout Corp.,72 two companies that
worked together to facilitate payments to merchants while knowing that those merchants were engaged in
unlawful conduct.
AlliedWallet acted as a payment facilitator for what could charitably be described as high-risk merchants. Payment
facilitators are payment intermediaries that register with acquiring banks to facilitate transactions on behalf of
other merchants. Consumer payments are processed using the payment facilitator's account and are remitted to
the merchant. There's nothing inherently illegal about this arrangement. However, AlliedWallet's high-risk
merchants included an operator of a phantom debt collection scam, a pyramid scheme promoter, and other
businesses that were obviously fraudsters.73 AlliedWallet took steps to actively obscure the nature of the
merchants' businesses from the acquiring banks and payment networks.74
Many of these bad merchants were referred to AlliedWallet by reseller agents Thomas Wells and his company,
Priority Payout-a payments company that was subject to its own 2009 FTC order75 for assisting in perpetrating an
illegal scheme by debiting bank accounts of fraud victims.76
The FTC settled claims against AlliedWallet by imposing a $110 million equitable judgment, which will result in
AlliedWallet's liquidation.77 Priority Payout and Wells agreed to pay $1.8 million as a contempt judgment.78 In
addition, both Priority Payout and Wells are permanently banned from engaging in, and assisting others with,
payment processing.79
2. The FTC's Enforcement Action Against an Online Consumer Lender
Online loan processor Avant, LLC ("Avant") settled a complaint with the FTC and agreed to pay $3.85 million in
consumer redress.80 The seven-count complaint challenged a number of Avant's marketing and payment
administration practices.81
According to the FTC, Avant made personal unsecured loans to consumers in amounts ranging from $1,000 to
$35,000.82 Consumers typically apply through Avant's consumer-facing website, but, in some instances, Avant's
telemarketing team called consumers in an attempt to induce them to apply for loans or to complete their
applications.83 To qualify for a loan, a consumer had to agree to pay by automatic payments-either "remotely
created checks" or preauthorized electronic funds transfer. However, because Avant is a "telemarketer" as defined
by the Telemarketing Sales Rule ("TSR"),84 Avant violated the TSR by "creating remotely created [checks] as
payment for . . . services . . . sold through telemarketing."85 Accordingly, for loans that were the result of those
telemarketing efforts, there was only one payment method permissible under the TSR: electronic funds transfer.
Unfortunately for Avant, conditioning the extension of credit to a consumer on the consumer's repayment by
preauthorized electronic transfer is a violation of the Electronic Funds Transfer Act ("EFTA") and Regulation E.86
Avant told consumers that, after their applications were approved, they could switch their payment method to
another reasonable method, including credit or debit card, money order, or paper check.87 However, in numerous

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instances, Avant rejected payments made by credit cards and debit cards.88 It also failed to timely credit borrower
payments made by check or money order, sometimes waiting weeks between payment and deposit and
processing of the paper payment.89
The FTC also took issue with Avant's payment collection practices. In at least hundreds of instances, Avant
allegedly debited consumers' accounts without authorization or in excess of what was authorized, sometimes
debiting the entire payoff balance without authorization.90 Further, when borrowers requested a quote to fully
satisfy the outstanding loan, Avant would provide the quote, but in many instances continued to debit accounts
even after the payoff amount was furnished, stating that the prior quote was erroneous.91
Based on these business practices, the FTC alleged five claims of unfair and deceptive practices, a TSR violation,
and an EFTA/Regulation E claim.92 In addition to requiring payment of $3.85 million for consumer redress, which
the FTC will administer, the stipulated order prohibits Avant from making misrepresentations, failing to timely
process payments, and debiting borrower accounts at intervals or amounts that deviate from those for which the
consumer has expressly consented.93
IV.Concluding Thoughts
In October 2018, the G20's Financial Action Task Force ("FATF") adopted changes to its Recommendations and
Glossary to clarify how its tools to deter and detect illicit financial activities generally apply to "virtual assets" and
"virtual asset service providers" ("VASPs").94 In early 2019, FATF signaled that, at its June 2019 session, it
intended to adopt new anti-money-laundering requirements for virtual assets that would impose record-creation-
and-maintenance responsibilities on VASPs.95 FATF's proposed requirements are patterned after the U.S.
Treasury Department's "Travel Rule" for wire transfers, which requires that information about the originators of
wire transfers of $3,000 or more be kept and moved along the path of the wire transfer.96
FATF's 2018 and early 2019 actions-as well as the additional amendments scheduled for June 2019 after this
survey year-add global efforts to regulate cryptocurrencies and other crypto assets to those we expect the federal
government may consider in the next survey year. We also expect that enforcement actions focused on consumer
payments will continue and that states will continue to regulate cryptocurrencies and clarify how their "money
transmission" statutes govern them and their providers, providers of exchange and wallet services, and providers
of payroll cards and other electronic payments and financial services at least as robustly as in recent years.
Sidebar
We thank Professor Jennifer B. Morgan of the Jerome Hall Library at Indiana University, and Cody Galvan, Maurer
School Class of 2021, for assistance with this survey. All mistakes, however, remain ours.
Footnote
1. Framework for "Investment Contract" Analysis of Digital Assets, U.S. Sec. &Exchange Commission (Apr. 3, 2019),
https://www.sec.gov/corpfin/framework-investment-contract-analysis-digital-assets.
2. Id. ii (citing SEC v. W. J. Howey Co., 328 U.S. 293, 298-99 (1946)).
3. Id. II.C.3.
4. Id. Ill.
5. Fin. Crimes Enf't Network, Application of FinCEN's Regulations to Certain Business Models Involving Convertible
Virtual Currencies, FIN-2019-G001 (May 9, 2019) [hereinafter 2019 CVC Guidance],
https://www.fincen.gov/sites/default/files/2019-05/FinCEN%20Guidance%20CVC%20FINAL %20508.pdf. The
Financial Crimes Enforcement Network ("FinCEN") is a bureau of the U.S. Department of the Treasury. What We Do,
FinCEN, https://www.fincen.gov/what-we-do (last visited Sept. 12, 2019).
6. See 31 U.S.C. 5330 (2018) (requiring registration by one who owns a "money transmitting business" within 180
days after business starts); id. 1022.380 (requiring re-registration every two years by any "money services
business").
7. 2019 CVC Guidance, supra note 5, at 12.
8. 31 C.F.R. 1010.100(ff) (2018) (defining "money services business").
9. Id. 1022.210.

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10. Id. 1010.220 (imposing customer-identification-program requirements on any "financial institution").
11. See 2019 CVC Guidance, supra note 5, at 2, 7-12; Fin. Crimes Enf't Network, Application of FinCEN's
Regulations to Persons Administering, Exchanging, or Using Virtual Currencies, FIN-2013G001 (Mar. 18, 2013),
https://www.fincen.gov/resources/statutes-regulations/guidance/applicationfincens-regulations-persons-
administering.
12. 2019 CVC Guidance, supra note 5, at 2, 7-12.
13. Id. at 3-7; Fin. Crimes Enf't Network, Bank Secrecy Act Regulations; Definitions and Other Regulations Relating
to Money Services Businesses, 76 Fed. Reg. 43585 (July 21, 2011) (to be codified at 31 C.F.R. pts. 1010, 1021
&1022).
14. 2019 CVC Guidance, supra note 5, at 23-28.
15. Id. at 30.
16. Id. at 18; see id. at 18-21.
17. Fin. Crimes Enf't Network, Advisory on Illicit Activity Involving Convertible Virtual Currency, FIN-2019-A003 (May
9, 2019) [hereinafter FinCEN 2019 Illicit Activity Advisory], https://www.fin
cen.gov/sites/default/files/advisory/2019-05-10/FinCEN%20Advisory%20CVC%20FINAL%20508. pdf.
18. Id. at 1.
19. Id. For more information on "darknet marketplaces," see A Primer on Darknet Marketplaces: What They Are and
What Law Enforcement Is Doing to Combat Them, Fed. Bureau Investigation (Nov. 1, 2016),
https://www.fbi.gov/news/stories/a-primer-on-darknet-marketplaces; ICE Investigators Expose Darknet Criminals
to the Light, U.S. Immigr. &Customs Enforcement (Nov. 15, 2017), https://www.ice.gov/features/darknet.
20. FinCEN 2019 Illicit Activity Advisory, supra note 17, at 2 n.4.
21. Id. at 1-2.
22. Id. at 7-10.
23. Id. at 3-7.
24. Office of Foreign Assets Control, OFAC FAQs: Sanctions Compliance, U.S. Dep't Treasury (July 2, 2019),
https://www.treasury.gov/resource-center/faqs/sanctions/pages/faq_compliance.aspx. (addressing pertinent
issues at paras. 559-63, 594, 646-47).
25. Id. at para. 559 (added Mar. 19, 2018).
26. Id. at para. 563 (added June 6, 2018).
27. Id. at para. 646 (added Nov. 28, 2018).
28. Id.
29. Press Release, Office of Foreign Assets Control, U.S. Dep't of the Treasury, Treasury Designates Iran-Based
Financial Facilitators of Malicious Cyber Activity and for the First Time Identifies Associated Digital Currency
Addresses (Nov. 28, 2018), https://home.treasury.gov/news/press-releases/ sm556.
30. Id.
31. Exec. Order No. 13827, 83 Fed. Reg. 12469 (Mar. 21, 2018) (referencing Exec. Order No. 13808, 82 Fed. Reg.
41155 (Aug. 29, 2017), and Exec. Order No. 13692, 80 Fed. Reg. 12747 (Mar. 11, 2015)).
32. World Trade Org., Venezuela Initiates WTO Dispute Complaint Against US Measures on Goods and Services
(Jan. 8, 2019), https://www.wto.org/english/news_e/news19_e/ds574rfc_08jan19_e. htm (referencing the WTO's
General Agreement on Tariffs and Trade ("GATT") and the General Agreement on Trade in Services ("GATS")).
33. Request for Consultations by Venezuela, United States-Measures Relating to Trade in Goods and Services
¶¶3(x), 4(xi), WTO Doc. WT/DS574/1 (Jan. 8, 2019), https://docs.wto.org/dol2fe/Pages/
FE_Search/DDFDocuments/250742/q/WT/DS/574-1.pdf.
34. Request for the Establishment of a Panel by Venezuela, United States-Measures Relating to Trade in Goods
and Services, WTO Doc. WT/DS574/2 (Mar. 15, 2019), https://docs.wto.org/dol2fe/
Pages/FE_Search/DDFDocuments/252368/q/WT/DS/574-2.pdf.
35. Givelify, LLC v. Dep't of Banking &Sec., 210 A.3d 393 (Pa. Commw. Ct. 2019).

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36. Id. at 395-96.
37. Id. at 396.
38. Id. (citing 7 Pa. Cons. Stat. 6101, 6102). The court noted that the pertinent statutory provisions had been
amended in 2017, but that those amendments did not apply retroactively to the challenged conduct. Id. at 396 n.3.
39. Id. at 402 (quoting 7 Pa. Cons. Stat. 6101, 6102 (requiring a license to engage in the business of "transmitting
money" by means of a "transmittal instrument"), and, in the last instance, Black's Law Dictionary 1638 (9th ed.
2009) (defining "transmit")).
40. State v. Espinoza, 264 So. 3d 1055 (Fla. Dist. Ct. App. 2019).
41. Id. at 1063-64 (citing Fla. Stat. 560.103(11), (21), (29) (defining "currency" as well as "payment instrument,"
which refers to "monetary value," which is defined as "a medium of exchange, whether or not redeemable in
currency")).
42. Id. at 1064-65 (citing Fla. Stat. 560.103(23), 560.125 (defining "money transmitter" and barring unlicensed
activity)).
43. Pa. Dep't of Banking &Sec., Money Transmitter Act Guidance for Virtual Currency Businesses (Jan. 25, 2019),
https://www.dobs.pa.gov/Documents/Securities%20Resources/MTA%20Guidance%
20for%20Virtual%20Currency%20Businesses.pdf (referencing 7 Pa. Cons. Stat. 6101 (defining "money" to mean
"currency or legal tender or any other product that is generally recognized as a medium of exchange").
44. Id. Pennsylvania's position does not eliminate exchanges' responsibilities under the 2019 CVC Guidance, which
is discussed above. See supra notes 5-16 and accompanying text.
45. Tex. Fin. Code Ann. 151.001-151.860 (West 2013 &Supp. 2018) ("Money Services Act").
46. Tex. Dep't of Banking, Supervisory Memorandum-1037 (rev. Apr. 1, 2019), https://www.dob.
texas.gov/public/uploads/files/consumer-informafion/sm1037.pdf.
47. Id. at 4.
48. Rakesh Sharma, Capital One Blocks Cryptocurrency Purchases with Its Card, Investopedia (June 25, 2019),
https://www.mvestopedia.com/news/capital-one-blocks-cryptocurrency-purchases-itscard/ (reporting that Capital
One, TD Bank and PNC Bank have blocked transactions to purchase cryptocurrency).
49. Justin Mauldin, VISA Issuers and Mastercard Make It Harder to Buy Bitcoin and Other Cryptocurrencies,
TechCrunch (Feb. 5, 2018, 2:30 PM), https://techcrunch.com/2018/02/05/visa-and-master card-make-it-harder-to-
buy-bitcoin-and-other-cryptocurrencies/.
50. Class Action Complaint for Violations of the Truth in Lending Act, Tucker v. Chase Bank USA, N.A., No. 18-cv-
03155-ER (S.D.N.Y. Apr. 10, 2018), https://www.morrisoncohen.com/siteFiles/files/ 2018_04_10%20-
%20Tucker%20v_%20Chase%20Bank%20USA,%20N_A.pdf; see TILA, 15 U.S.C. 1601-1667f (2018).
51. Class Action Complaint, Galavis v. Bank of Am., N.A., No. 18-cv-09490 (C.D. Cal. Nov. 8, 2018),
https://www.morrisoncohen.com/siteFiles/files/2018_11_8%20-%20Galavis%20v_%20Bank
%20of%20America%20and%20Visa.pdf. The bank's motion to dismiss was denied on March 26, 2019. Galavis v.
Bank of Am., N.A., No. 18-cv-09490 (C.D. Cal. Mar. 26, 2019) (order denying motion to dismiss).
52. Eckhardt v. State Farm Bank FSB, No. 18-cv-01180, 2019 WL 1177954 (C.D. Ill. Mar. 13,2019).
53. Id. at ·1.
54. Id. (quoting cardholder agreement).
55. Id.
56. Id. at ·2.
57. Id. at ·4.
58. Id. at ·8-9.
59. Id. at ·7.
60. Id.
61. N.Y. Gen. Bus. Law 352-359-h (Consol. 1999 &Supp. 2018).
62. Ex Parte Order Pursuant to General Business Law 354, James v. iFinex Inc., No. 450545/ 2019 (N.Y. Sup. Ct.

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Apr. 24, 2019).
63. Stephen T. Middlebrook, Sarah Jane Hughes &Tom Kierner, Two Steps Forward, One Step Back: Developments
in the Law Affecting Electronic Payments and Financial Services, 73 Bus. Law. 277, 282-83 (2017) [hereinafter
2017 Survey].
64. Stephen T. Middlebrook, Sarah Jane Hughes &Tom Kierner, Developments in the Law Affecting Electronic
Payments and Financial Services, 74 Bus. Law. 267, 269-70 (2018) [hereinafter 2018 Survey].
65. 2017 Survey, supra note 63, at 282-83 (citing N.Y. Comp. Codes R. &Regs. tit. 12, 192-1.1 to -2.3).
66. N.Y. Comp. Codes R. &Regs. tit. 12, 192-2.3 (2019).
67. Id.
68. 2017 Survey, supra note 63, at 283 (citing Glob. Cash Card, Inc. v. Comm'r of Labor, No. PR 16-120 (N.Y. Indus.
Bd. of App. Feb. 16, 2017)).
69. 2018 Survey, supra note 64, at 269 (citing Decision, Order &Judgment, Reardon v. Glob. Cash Card, Inc., No.
2643-17 (N.Y. Sup. Ct. May 23, 2018)).
70. Judith E. Rinearson &Eric A. Love, Surprise: New York State Court Ruling Means that NY Payroll Card
Regulations Could Go into Effect After All, Nat'l L. Rev. (July 23, 2018) (reporting that appeal was filed on July 13,
2018).
71. Stipulated Final Order for Permanent Injunction and Monetary Judgment, FTC v. AlliedWallet, Inc., No. 2:19-CV-
4355-SVW-E (C.D. Cal. June 7, 2019) [hereinafter AlliedWallet Order].
72. Stipulated Final Judgment, Order for Compensatory Contempt Relief, and Supplemental Order for Permanent
Injunction and Other Equitable Relief, FTC v. Interbill, Ltd., No. CV-S-0601644-JCM-PAL (D. Nev. Apr. 10, 2019)
[hereinafter Priority Payout Order].
73. Complaint for Permanent Injunction and Other Equitable Relief at 20-33, FTC v. AlliedWallet, Inc., No. 2:19-CV-
4355-SVW-E (C.D. Cal. May 20, 2019).
74. Id. at 15-20.
75. Final Judgment and Order for Permanent Injunction and Other Equitable Relief, FTC v. Interbill, Ltd., No. CV-S-
06-01644-JCM-PAL (D. Nev. Apr. 30, 2009).
76. Id. at 2.
77. AlliedWallet Order, supra note 71, at 17.
78. Priority Payout Order, supra note 72, at 5.
79. Id. at 4.
80. Stipulated Order for Permanent Injunction and Monetary Judgment, FTC v. Avant, LLC, No. 1:19-cv-02517 (N.D.
Ill. May 17, 2019) [hereinafter Avant Judgment].
81. Complaint for Permanent Injunction and Other Equitable Relief, FTC v. Avant, LLC, No. 1:19cv-02517 (N.D. Ill.
Apr. 15, 2019) [hereinafter Avant Complaint].
82. Id. at 3.
83. Id. at 4.
84. 16 C.F.R. 310.2(ff) (2018).
85. Id. 310.4(a)(9).
86. 15 U.S.C. 1693k(1) (2018); 12 C.F.R. 1005.10(e)(1) (2019).
87. Avant Complaint, supra note 81, at 4.
88. Id. at 5.
89. Id.
90. Id. at 8-9.
91. Id. at 6-7.
92. Id. at 10-15.
93. Avant Judgment, supra note 80, at 3-12.
94. Regulation of Virtual Assets, Fin. Action Task Force (Oct. 19, 2018), http://www.fatf-gafi.org/

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publications/fatfrecommendations/documents/regulation-virtual-assets.html.
95. Public Statement-Mitigating Risks from Virtual Assets, Fin. Action Task Force (Feb. 22, 2019), http://www.fatf-
gafi.org/publications/fatfrecommendations/documents/regulation-virtual-assets-inter pretive-note.html.
96. 31 C.F.R. 1020.410 (2018) (previously codified at 31 C.F.R. 103.33(e), (f) (2009) (applying such requirements to
banks and non-banks, respectively)).

DETALLES

Materia: Currency; Software; Law enforcement; Mobile commerce; Donations; Digital

currencies; Financial services; Financial institutions; Sanctions; Executive orders;
Business models

Lugar: United States--US Venezuela Pennsylvania

Empresa/organización: Nombre: World Trade Organization; NAICS: 928120

Título: Developments in the Laws Affecting Electronic Payments and Financial Services

Autor: Kierner, Tom1; Middlebrook, Stephen T2; Hughes, Sarah Jane31 associate at
Womble Bond Dickinson (US). Prior to t hat, he was assistant general counsel at a
payments company2 counsel to Womble Bond Dickinson (US). Prior to that, he was
the general counsel at two fintech companies and senior counsel at the U.S.
Department of the Treasury. He is co-chair of the Electronic Payments and Financial
Services Subcommittee of the ABA Business Law Section's Cyberspace Law
Committee3 University Scholar and Fellow in Commercial Law at Indiana University's
Maurer School of Law. She is co-chair of the Electronic Payments and Financial
Services Subcommittee of the ABA Business Law Section's Cyberspace Law
Committee

Título de publicación: The Business Lawyer; Chicago

Tomo: 75

Número: 1

Páginas: 1695-1707

Año de publicación: 2020

Fecha de publicación: Winter 2019/2020

Editorial: American Bar Association

Lugar de publicación: Chicago

País de publicación: United States, Chicago

Materia de publicación: Business And Economics, Law--Corporate Law

PDF GENERADO POR SEARCH.PROQUEST.COM Page 11 of 12

 ISSN: 00076899

Tipo de fuente: Trade Journals

Idioma de la publicación: English

Tipo de documento: Feature

ID del documento de 2350105318

ProQuest:

URL del documento: https://search.proquest.com/docview/2350105318?accountid=137088

Copyright: Copyright American Bar Association Winter 2019/2020

Última actualización: 2020-02-03

Base de datos: ProQuest Central

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