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. McGonigle, P.C. has substantial experience in dealing with these regulators. The 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.

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Looking Forward

Growth. With cryptocurrencies hitting all-time highs late in 2021, following an almost two-year run up in value, institutional adoption and investment have rapidly increased and M&A activity is substantial. Growth continues to be global, and companies are as interested in other markets as they are in the U.S., despite its traditional role as leader in tech. Even a decrease in crypto prices in 2022 is unlikely to slow the continued investment and disruption from crypto. We expect to see convergence in the coming year of traditional finance and DeFi as traditional financial firms recognize the promise of DeFi, as well as its potential to disrupt the financial services industry, and regulators cajole some DeFi firms into regulated entities. Expect traditional intermediaries, such as securities broker-dealers, to partner with crypto firms to provide customers with a full suite of financial products. Facebook’s move into the metaverse may presage competition from Big Tech, bringing even more attention to the space.

Enforcement. The new SEC leadership has made clear that they are building a wave of enforcement actions in this space, especially against digital asset marketplaces. Other federal and state authorities are ready to follow suit. Companies need to redouble efforts to address their legal and regulatory risks.

Legislation. The calls for new crypto-focused legislation are getting louder, coming from both sides of the political spectrum, as well as from regulators. A report on stablecoins from the President’s Working Group in November 2021 called for comprehensive legislation to address systemic risks. Although multiple bills are in various stages of being introduced in Congress already, it remains unclear how strict or permissive any new laws will be. We expect a strong lobbying effort from various crypto trade organizations as well as major crypto companies.