Navigating the regulatory response to fintech’s and crypto’s disruption of the financial services industry

Our lawyers understand the legal and regulatory challenges fintech and crypto companies face as they increasingly disrupt the financial services, banking and investment industries, changing the way people invest, spend and lend money. We bridge the gap between emerging technologies and the traditional business, legal and regulatory environment, helping companies leverage new technology and find market opportunities in rapidly changing industries.

The increasing use of crypto assets has given rise to complex legal issues including those around:

  • Regulatory requirements to register as investment advisers, investment companies, securities exchanges, broker-dealers, commodity pool operators, commodity trading advisors and money service businesses)
  • The design, regulatory approval and launch of ETFs and derivatives,
  • Fund formation and regulatory strategy and compliance (including as these relate to valuation, custody and reporting)
  • Corporate law and securities transactions (including M&A and financing transactions)
  • Venture capital
  • Taxation
  • Anti-money laundering

Artificial intelligence technologies, and Generative AI in particular, are causing companies to reimagine the way they conduct their businesses.  The use of AI raises novel and complex legal and regulatory issues relating to the fiduciary duties of care and loyalty, investor and consumer protection, cybersecurity and privacy, disclosure obligations, fair competition and non-discrimination. The treatment of these issues differs across jurisdictions, as the U.S. and the EU in particular chart divergent approaches. As AI becomes more integrated into investment and financial business lines, in particular investment, lending and marketing activities, these issues require sophisticated counsel with deep experience in both new applications of the technology and existing business, market and regulatory practice.

Hailed as "very strong on technology . . . a nuts-and-bolts firm in the fintech space" (Chambers FinTech), our fintech and crypto lawyers work across offices in the United States, Europe and Asia, drawing on decades of experience to advise key players in the biggest global fintech and crypto markets. Clients relying on our solutions range from large financial institutions with operations spanning many countries to entrepreneurial companies launching their businesses in a single jurisdiction. Dechert was named a leading firm in the Nationwide FinTech Legal category in the Chambers FinTech Guide

Our fintech lawyers are at the forefront of sophisticated businesses, products and transactions involving crypto assets, helping increase their efficiency, accuracy and value. We know blockchain – you can find our analyses in the Blockchain and Digital Assets Resources Center – and are well-equipped to address the regulatory issues faced by fintech firms disrupting the financial services, investment and banking industries. Our efforts include helping clients leverage the benefits of distributed ledger technology (DLT) to innovate and re-envision how financial instruments and investment products can be constructed. 

    • 21 Shares and Ark Invest in the launch of their inaugural Bitcoin ETP.
    • A co-founder of a cryptocurrency wallet company facing charges of conspiracy to commit money laundering and operating an unlicensed money transmitting business. 
    • A Hong Kong-licensed fund manager in connection with securing regulatory approval to manage portfolios that directly invest up to 100% in crypto assets from the Hong Kong Securities and Futures Commission (SFC).
    • A private equity firm in its investment in a global electronic trading firm.
    • A senior executive of a cryptocurrency network in a high-profile case involving criminal and civil investigations by SDNY and the SEC. The executive, indicted on multiple charges including conspiracy to commit securities fraud, market manipulation, and wire fraud; securities fraud; market manipulation; and wire fraud, pled guilty and is cooperating with the investigation.
    • Altarius Asset Management Ltd. in connection with the establishment of an umbrella fund structure for investments into blockchain projects/cryptoassets.
    • Bamboo Holdings Pty Ltd. in connection with the Australian based fintech client’s plans to launch its micro-investing crypto app in the U.S.
    • BitFury Group, a leading bitcoin infrastructure provider and bitcoin transaction processor, on equity financing.
    • Blockchain Limited, the largest crypto e-wallet and blockchain search provider, on its reincorporation and initial equity financing transactions.
    • Coin Homes Inc. on structuring lending program secured by real estate and cryptocurrency.
    • Digital Asset Strategies in connection with the launch of a crypto hedge fund.
    • The Divi Project in connection with the terms of use and privacy policy and regulatory matters relating to the blockchain-based financial services firm launching its cryptocurrency wallet.
    • Figure Technologies, Inc. on the US$20 million security token offering successfully completed by Provenance Blockchain, Inc.
    • Figure Technologies, Inc. on its closing of a US$1 billion asset-based financing facility custodied on its Provenance.io blockchain.
    • Huntingdon Valley Bank (HVB) in connection with a master participation arrangement to sell participations in commercial loans to the Maker DAO PROTOCOL.
    • iTrustCapital in connection with a variety of tax and regulatory issues related to their highly innovative product offerings as the world’s largest platform for buying and selling cryptocurrencies through individual retirement accounts.
    • Pagaya Investments, as issuer, grantor trust, sponsor, administrator and depositor, in connection with multiple asset-backed securitizations.
    • Rudy Capital on the structuring and initial issuance of debt instruments with a total nominal value of 15 million euros.
    • Rubinstein & Schmiedel on the structuring and launch of their first regulated crypto trading investment fund as well as on German regulation and tax regarding crypto trading strategy.
    • Rudy Capital on the establishment of Crypto Defi Investment product.
    • Several directors in the ongoing investigation by a Special Litigation Committee appointed to address allegations related to the direct listing of a major cryptocurrency company, where insiders sold several billion US dollars in stock before a price drop; the court denied a motion to dismiss derivative claims.

The rapid proliferation of AI-based applications is transforming the financial services industry, revolutionizing investment processes, business operations, customer communications and compliance and risk management functions. While AI offers numerous opportunities and benefits, it also presents various challenges and risks – and has attracted significant regulatory attention from government agencies such as the SEC, the Commodity Futures Trading Commission, the Department of Justice and Financial Industry Regulatory Authority.

Read more about our artificial intelligence practice 

Why Address AI Issues Now?

Generative AI is reshaping business operations across industries, and the pace of AI innovation is far ahead of the ability of legal and regulatory systems to adapt. In addition, different regulatory jurisdictions are responding with different approaches and at different speeds, e.g., with the U.S. federal government adopting a facilitating stance, certain U.S. states taking pro-regulatory approaches, and the European Union adopting a comprehensive AI regulatory framework. Different policymakers have different focuses, including upholding fiduciary duties, promoting cybersecurity and privacy, safeguarding and protecting consumers from fraud and inaccurate or faulty products and systems, enforcing full and fair disclosure obligations, promoting fair competition and systemic stability, protecting civil rights and ensuring non-discrimination.

Companies adopting AI technology must be vigilant about potential legal risks and implement robust systems and controls to mitigate any potential harm.

    • Affirm, Inc., Avant, Inc., Carvana Co., BFS Capital, Inc., Enova International, Inc., and loanDepot.com, LLC in connection with bank partnership arrangements; whole loan sale and forward flow programs; 144A securitization transactions; and warehouse and term-financing facilities.
    • Further Global Capital Management in its acquisition of Payment Alliance International, the nation’s largest privately held ATM provider.
    • GIC in connection with the US$20 billion acquisition by an investor group of a majority stake in Thomson Reuters’ Financial & Risk Business (Refinitiv) and subsequent sale by the investor group of Refinitiv, a global provider of financial market data and infrastructure, to the London Stock Exchange for US$27 billion.
    • GIC on the merger of Ultimate Software, a specialist HR software solutions and HR payroll, and Kronos Incorporated for an enterprise value of US$22 billion.
    • GIC in connection with the acquisition (along with financial services-focused PE firm Stone Point Capital) of Ascensus, a technology-enabled retirement and savings account provider, from its current private equity owners.
    • GIC on the merger of Alight Solutions LLC, a cloud-based software-as-a-service focused benefits administrator, with special purpose acquisition company Foley Trasimene Acquisition Corp.
    • Huntingdon Valley Bank (HVB) in connection with a master loan participation agreement with respect to commercial loans.
    • Interactive Brokers Group, an automated global electronic market-maker and broker that operates in more than 60 electronic exchanges and trading venues around the world, in its US$1.2 billion initial public offering.
    • Hedge fund managers on their deployment of generative AI and machine learning techniques in their investment strategies.
    • JetPay, a provider of end-to-end payment processing and Human Capital Management solutions, on its US$184 million sale to NCR Corporation.

Borrowers and lenders have new ways of connecting in the marketplace, creating opportunities for private investors, small and medium-sized enterprises and institutional investors. Our fintech lawyers know the legal framework and familiar structures employed (144A, Reg D, S1) – and the key differences – as tokenized securities bring new asset types to the markets. With extensive experience in marketplace lending and capital market structures, we guide established and emerging fintech clients as they execute sophisticated structured finance and securitization transactions, helping them comply with regulatory responses and challenges to fintech in the process.

    • Affirm, Inc., Avant, Inc., Carvana Co., BFS Capital, Inc., Enova International, Inc., and loanDepot.com, LLC in connection with bank partnership arrangements; whole loan sale and forward flow programs; 144A securitization transactions; and warehouse and term financing facilities.
    • Certain large mutual funds complexes and their boards of directors with respect to the acquisition by the funds of residential mortgage loans.
    • Fund managers in connection with loan purchases and financing facilities related to loans originated on platforms sponsored by Lending Club, SoFi, Freedom Plus, Square, CommonBond, Funding Circle U.S., Funding Circle U.K., Upstart and others.
    • Huntingdon Valley Bank (HVB) in connection with a master participation arrangement to sell participations in commercial loans to the MakerDAO PROTOCOL, believed to be the first commercial loan participation between a U.S. regulated financial institution and decentralized digital currency (the “DAI” a stable coin).
    • Morgan Stanley Investment Management in the establishment of AIP Alternative Lending Fund A and AIP Alternative Lending Fund P - registered closed-end funds organized primarily to acquire marketplace loans.
    • Pagaya Investments, as issuer, grantor trust, sponsor, administrator, depositor, in connection with a US$900 million 144A/Reg S private asset backed securitization, backed by loans underwritten by Cross River Bank, LendingClub Bank, National Association, Upgrade Inc., Marlette Funding LLC and Prosper Funding, LLC.
    • Pagaya Investments, as issuer, grantor trust, sponsor, administrator and depositor, in connection with a US$423 million 144A asset backed securitization, the company’s first rated consumer loan securitization, backed by loans underwritten by LendingClub, Upgrade Inc., Avant, Marlette and Prosper Funding.
    • Pagaya Investments, as sponsor and administrator, in connection with a US$115 million transaction and it’s first to be backed by loans underwritten by Prosper.
    • Pagaya Investments in a US$100 million securitization which was a 100% prefunded private 144A securitization of unsecured consumer loans. All loans in the deal were originated by LendingClub.
    • Pagaya Investments, as borrower and issuer, in connection with a US$350 million single-family rental securitization, the company’s first single-family residential securitization.
    • Pagaya Structured Products LLC as sponsor in connection with a US$1.2 billion securitization of marketplace consumer loans, the largest ever unsecured consumer loan securitization (eclipsing the previous largest which Pagaya closed in 2020).
    • Pagaya US Holding Company LLC, as issuer, in connection with a US$200 million deal, the company’s first personal credit line securitization, backed by unsecured consumer credit line receivables underwritten by Cross River Bank and Upgrade, Inc.

In addition to the areas prior, we advise on business-critical matters related to: 

  • Breach response, litigation and enforcement actions 
  • Compliance with public and private regulatory requirements 
  • Cybersecurity compliance advice, analytics and litigation 
  • Data privacy compliance advice, analytics and litigation 
  • Data protection laws
  • Domestic and international tax 
  • ETF launches and derivatives 
  • Fund and investment adviser formation and related regulatory matters 
  • Government enforcement, investigations and examinations 
  • IP advice, protections, licensing and litigation 
  • Joint ventures, strategic alliances and outsourcings 
  • Mergers and acquisitions 
  • Private equity and venture capital transactions 
  • Private fund formation 
  • Registration as alternative trading systems and broker-dealers 
  • Securities litigation 
  • Software-as-a-service and data monetization 
  • Structured finance and securitization 
  • Technology and software disputes