USA Law and Practice Contributed by: Margo H. K. Tank, Michael Fluhr, Deborah Meshulam, Kristin Boggiano, David Stier, Liz S. M. Caires, Adam Dubin, Emily Honsa Hicks, Meghan Carey, Kathleen Birrane and Eric Hall, DLA Piper LLP
regulatory compliance processes and reporting requirements (as opposed to providing regulated products and services directly to customers). Instead, most regtech providers are governed by contractual obligations which may include requirements to ensure compliance with finan - cial law and regulation. See 2.8 Outsourcing of Regulated Functions . 9.2 Contractual Terms to Assure Performance and Accuracy See 9.1 Regulation of Regtech Providers . 10. Blockchain 10.1 Use of Blockchain in the Financial Services Industry Traditional financial services industry players are testing blockchain technology to address enhanced transaction efficiencies, security, and transaction record integrity and auditability. Most tend towards centralised, permissioned platforms – not decentralised platforms. Traditional players are also exploring blockchain to streamline financial processes, including pay - ments, settlements, real estate recording, vehi - cle titling, and other record-keeping, including for loan transactions, insurance claims, and trade settlements. Additionally, several finan - cial institutions are using blockchain to enable the purchase and sale of digital carbon credits and deploying digital asset control systems that enjoy the benefits of the legal framework of UCC Article 8. 10.2 Local Regulators’ Approach to Blockchain Blockchain activities may be regulated by mul - tiple, independent regulators, state and federal,
with overlapping jurisdiction. Regulators have diverged in enthusiasm for blockchain. The SEC has previously asserted that almost all cryptocurrencies constitute securities. Influ - enced by the new administration, the SEC is now dismissing several large enforcement actions and closing ongoing investigations. The CFTC and financial regulators have proven more willing to work with certain players, such as spot and futures exchanges, to allow activi - ties subject to regulation. See 6. Marketplaces, Exchanges and Trading Platforms . State regulators vary in support for blockchain. Multiple state legislatures have adopted amend - ments to UETA to include blockchain and other DLTs within scope. Other states have restricted blockchain activities in the state or imposed strict registration requirements. State banking regulators require licensing of money transmis - sion, payments, and trading activities. State securities and commodities regulators have been less active. Greater regulatory clarity and coordination may come in the future. See 1.1 Evolution of the Fin- tech Market . 10.3 Classification of Blockchain Assets As described above, regulators have yet to agree on a scheme to assess the open questions of: (1) when cryptocurrency constitutes a security, a commodity, a currency, or something else; and (2) when certain activities, such as borrowing, lending, or trading, particularly when executed via a decentralised protocol, fall within regulatory jurisdiction. See 2.6 Jurisdiction of Regulators .
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