FinTech & Blockchain

The rapid growth of technological innovation has expanded markets and created tremendous opportunities in the financial services industry. Financial institutions have increased their use of, and reliance on, technology to manage and understand their businesses, markets, trading activity, clients, and regulatory compliance. Blockchain technology is proving to be one of the most transformative new developments as it has led to the creation of cryptocurrencies, smart contracts, and myriad other applications. The ability of blockchain technology to track everything from the execution of financial transactions to the movement of goods and materials in a distributed, immutable ledger is transforming industries around the world, including financial services, insurance, health care, shipping, computing, and more.

The increasing use of FinTech, as well as the explosive growth of investment in cryptocurrencies and digital tokens, has spurred strong interest from industry regulators. Murphy & McGonigle has substantial experience in dealing with these regulators. The Murphy & McGonigle FinTech & Blockchain team advises broker-dealers, traders, exchanges, banks, private equity and venture investors, asset managers, private funds and other market participants on complex regulatory and legal matters related to the use of technology. We regularly work with a diverse range of companies and individuals that have a stake in legal and regulatory developments impacting blockchain technology.

For news, blogs, events, and other information on legal developments in the Blockchain space, visit our website www.blockchainlawcenter.com.

Looking Forward

All signs point towards a breakout year in 2021 for blockchain technology, cryptocurrency adoption, and increased issuance and trading of digital securities. Bucking the COVID-19 worldwide recession, Bitcoin went on a tear in the second half of 2020 and was poised to break its all-time high in November. Other major indicators of market adoption of blockchain and crypto in 2020 include:

  • Congress introduced more crypto-focused legislation
  • Continued development and maturation of cryptocurrency market structure, including use of cryptocurrency prime brokers, particularly in the institutional space
  • Increased infrastructure to issue and trade digital securities
  • The OCC announced national banks can provide custody for customers’ cryptocurrencies
  • DeFi, in which cryptocurrencies are leveraged in blockchain-based financial products, continues to expand

With crypto prices soaring, we expect more capital raising in blockchain-based companies using digital securities. Companies will want to raise capital in registered and exempt securities offerings as the negative consequences of the 2017 ICO craze have been realized. The SEC notched two big wins this year in heavily litigated and closely watched cases: federal courts ruled that the coin offerings run by elegram and Kik were governed by the securities laws. It is unclear how the change in administration may impact the SEC’s approach to regulating cryptocurrency.

2021 is likely to see new use cases for blockchain as capital pours into the industry. Beyond blockchain, artificial intelligence will continue to transform investment advisory services by automating the process and driving down fees. Machine learning is disrupting automated trading and pushing the boundaries of high-frequency trading algorithms.