US Senators Urge FTC to Address AI-Enabled Scams Targeting Older Americans

Recently, four US Senators – Bob Casey (D-PA), Richard Blumenthal (D-CT), John Fetterman (D-PA), and Kirsten Gillibrand (D-NY) – expressed deep concern about the use of artificial intelligence (AI) in scams targeting older Americans. They addressed a letter to Federal Trade Commission (FTC) Chair Lina Khan, requesting detailed information on the FTC’s efforts to track and combat these AI-enabled frauds and scams​​​​.

FTC’s Efforts and Inquiry

The Senators highlighted the increasing role AI plays in frauds and scams, particularly its realistic nature which often leaves victims unaware of being targeted by AI. They emphasized the urgency of understanding the extent of this threat to counter it effectively. The inquiry requests the FTC to share how it is gathering data on AI use in scams, ensuring accurate reflection in its Consumer Sentinel Network database. The Sentinel database serves as a repository for consumer complaints, including those about scams, and is accessible to law enforcement agencies​​​​.

Specific Concerns and Questions

The Senators’ letter raises specific concerns about AI’s role in exacerbating traditional scams, such as family emergency scams, romance scams, business-related scams, and phishing, where AI tools like chatbots, voice cloning, and deepfakes are used. They asked the FTC to detail how AI-powered frauds are identified and reported within Sentinel, the types of scams prevalent, and the use of AI by the FTC itself for data analysis. They also requested that the FTC identify generative AI scams that might go unnoticed by victims​​.

This letter comes in the wake of a broader crackdown by federal agencies on harmful uses of AI. The FTC, along with other agencies like the US Equal Employment Opportunity Commission, Department of Justice, and Consumer Financial Protection Bureau, has issued a joint pledge against harmful AI uses. The Senators are seeking more information on the FTC’s understanding of recent AI scam developments, the prevalence of such scams, steps being taken to protect older Americans, and whether the FTC will update its educational materials to reflect these rising risks​​.

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FCA Unveils Guidance on Cryptoasset Promotions Compliance

The Financial Conduct Authority (FCA) has unveiled a “finalised non-handbook guidance” document on Cryptoasset Financial Promotions. This release followed observed lapses in adherence to the new laws governing crypto asset promotions, which took effect on October 8, 2023.

On June 8, 2023, the pertinent legislation concerning cryptoasset financial promotions was enacted, and subsequent rules were published under the identifier PS23/6. Central to these rules is the stipulation that financial promotions must embody fairness, clarity, and accuracy to prevent misleading the public. In tandem with these final rules, a consultation on the proposed Guidance was also issued to ensure firms grasp the nuances of this requirement as it pertains to crypto asset promotions.

The consultation phase came to a close on August 10, 2023, paving the way for the FCA to review the feedback and finalize the Guidance which is detailed in Chapter 2 of the document. This finalised Guidance, published on November 2, 2023, doesn’t introduce new obligations but elucidates the existing regulatory obligations of firms. It emphasizes that adherence to this Guidance will be deemed as compliance with the relevant rule or requirement, although it’s not mandatory to follow the Guidance to achieve compliance.

A noteworthy mention in the document is the introduction of a secondary international competitiveness objective, activated on August 29, 2023. Although this objective wasn’t in effect during the publication of the final rules, its spirit was considered in PS23/6. This objective aligns with the broader policy to shield consumers while fostering beneficial innovation that potentially fuels long-term economic growth in the UK.

The Guidance underscores the primary aim of mitigating consumer harm by clarifying the expectations of firms, thereby promoting better compliance with the relevant rules. By doing so, it aims to prevent the erosion of trust in financial services that may arise from consumers not fully grasping the risks associated with cryptoasset purchases. Through clearer and fairer promotions, consumers are envisaged to make well-informed decisions that resonate with their risk profiles and needs.

The transition hasn’t been smooth, with reports indicating a dismal degree of compliance since the rules came into play. Some market participants have even expressed intentions to exit the UK market due to the perceived restrictive nature of these laws. The FCA, however, has been proactive in issuing multiple warnings and reminders since June 8.

Moreover, certain significant technical benchmarks have been slated for January 8, 2024. Amid these developments, the FCA’s Guidance also touches on the Travel Rule, formulated by the Financial Action Task Force, and its implementation in the UK on September 1.

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Taiwan’s Legislature Considers Virtual Asset Management Bill to Protect Consumers

On October 25, Taiwanese legislators tabled the Virtual Asset Management Bill before the single-chamber parliament, the Legislative Yuan. This initiative seeks to bolster consumer protection and furnish better oversight over the burgeoning digital asset sector.

The 30-page document delineates several pragmatic obligations for Virtual Asset Service Providers (VASPs). Noteworthy mandates include the segregation of client funds from the firm’s operational reserves, the inception of an internal audit and control system, and membership in local trade associations pertinent to digital assets. Although the bill is seen as moderate, it forgoes the imposition of a 1:1 reserve requirement for stablecoin issuers and does not delve into the realm of algorithmic stablecoins.

The legislation also outlines penalties for unlicensed VASPs operations, establishing fines ranging from 2 million Taiwanese dollars (approximately $60,000) to 20 million TWD (around $600,000). Existing market participants have been granted a six-month window post-enactment to secure the necessary licensure.

This legislative venture follows the September 2023 guidelines issued by the Financial Supervisory Commission (FSC) of Taiwan, which barred foreign VASPs from operating within Taiwanese jurisdiction without requisite approvals. This move comes amidst the formation of a self-regulatory body by major crypto exchanges within Taiwan on September 26. Prominent local exchanges like MaiCoin, BitstreetX, Hoya Bit, Bitgin, Rybit, Xrex, and Shangbito congregated to establish the Taiwan Virtual Asset Platform and Transaction Business Association, aiming to foster a collaborative environment between the crypto industry and regulatory bodies.

In juxtaposition with the more stringent regulatory frameworks seen in neighboring Hong Kong and Japan, Taiwan’s proposal appears more lenient. Unlike Hong Kong’s rigid stance on derivatives and stablecoins, and Japan’s requirement for the employment of custodians by locally accredited exchanges, the Taiwanese bill merely emphasizes the separation of client and company funds.

Furthermore, the bill mandates periodic reporting by exchange operators, although it doesn’t specifically address Proof of Reserves. It leaves room for the regulatory body to devise asset ratio rules post consultations with industry stakeholders. This nuanced approach reflects a measured stride towards establishing a regulatory framework post the collapse of the FTX exchange in November of the previous year, which had garnered a significant user base in Taiwan due to its favorable interest rates on US dollars compared to local banking offerings.

Preliminary feedback from the crypto sector in Taiwan displays a positive outlook towards the inception of formal regulatory supervision, which is seen as a constructive step towards legitimizing the industry.

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California Governor Signs Digital Financial Assets Bill, Tightening Crypto Regulations from July 2025

On October 13, 2023, California Governor Gavin Newsom signed Assembly Bill 39, enacting the Digital Financial Assets Law, aimed at establishing a comprehensive regulatory framework for cryptocurrency activities in the state. Set to be effective from July 1, 2025, the law mandates the Department of Financial Protection and Innovation (DFPI) to devise a stringent regulatory structure encompassing licensure and enforcement mechanisms for certain cryptocurrency operations.

The Governor emphasized the importance of the new law in providing a robust foundation to manage the burgeoning digital assets market. The bill entrusts the DFPI with rulemaking authority, along with an 18-month implementation timeframe to ensure a meticulously crafted regulatory architecture in sync with evolving industry trends and aimed at consumer harm mitigation.

The law is a proactive attempt to bolster consumer and investor protections, thereby minimizing fraudulent activities and ensuring accountability of malicious actors within the digital asset domain.

Under the new law, individuals and businesses engaging in commercial transactions involving digital assets are required to obtain a licensure from the DFPI. This move aims to bring transparency and compliance within commercial operations concerning digital assets, aligning California with the broader regulatory trends seen in various jurisdictions.

The law references existing Californian legislation governing money transmission, which mandates licensing by the DFPI for banking and transfer services operating within the state. Extending this requirement to cryptocurrency transactions signifies a concerted effort to uphold regulatory standards in the face of a rapidly advancing digital asset ecosystem.

Interestingly, this development contrasts with Governor Newsom’s previous stance in 2022, when he chose not to sign a similar bill aimed at establishing a licensing and regulatory framework for digital assets. Despite the lack of opposition during its debate in the California State Assembly, the Governor had then returned the bill unsigned, citing the necessity for a more agile framework to keep pace with the swiftly evolving cryptocurrency sector.

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FTC Settles with Voyager Digital Over Misleading FDIC Claims, Former CEO Charged

The Federal Trade Commission (FTC) on October 12, 2023, disclosed a settlement with the beleaguered cryptocurrency firm, Voyager Digital, post allegations of misleading consumers regarding the safety of their deposits. The settlement emerges amid a broader crackdown on deceptive practices in the rapidly evolving crypto sector.

Voyager Digital, under the helm of CEO Stephen Ehrlich, is alleged to have falsely claimed that consumers’ deposits were insured by the Federal Deposit Insurance Corporation (FDIC) from at least 2018 until its bankruptcy declaration in July 2022. This misrepresentation reportedly played a significant role in attracting consumers to entrust their funds to Voyager. The debacle resulted in consumers being locked out of their cash accounts for over a month, culminating in a loss exceeding $1 billion in cryptocurrency assets.

Samuel Levine, the Director of the FTC’s Bureau of Consumer Protection, emphasized the ongoing efforts to curb deceitful claims surrounding cryptocurrency assets, which witnessed over $1.4 billion in losses due to scams in the previous year alone. The action against Voyager and Ehrlich underscores the FTC’s commitment to ensuring companies and individuals adhere to truthful claims, particularly regarding FDIC insurance.

The settlement mandates a permanent prohibition on Voyager and its affiliates from handling consumers’ assets. Furthermore, a $1.65 billion judgment has been agreed upon, albeit suspended to allow the bankruptcy proceedings to facilitate the return of remaining assets to consumers. However, former executive Stephen Ehrlich has not concurred with a settlement, thus, the litigation against him will continue in federal court. Additionally, Ehrlich’s wife, Francine Ehrlich, has been named as a relief defendant in the complaint.

Central to the FTC’s complaint is the misrepresentation of FDIC insurance, a crucial factor for consumers deliberating on where to deposit their assets. Voyager’s marketing materials, inclusive of direct assertions regarding the safety of consumers’ deposits, prominently featured claims of FDIC insurance which were found to be baseless as Voyager is neither a bank nor a financial institution. The complaint further noted that the FDIC does not insure cryptocurrency assets, rendering Voyager’s claims as misleading.

The settlement with Voyager sends a clear message to the crypto industry regarding the veracity of claims pertaining to asset safety and insurance. The FTC’s action illustrates a broader regulatory scrutiny aimed at ensuring transparency and consumer protection within the financial sector, extending beyond traditional banking to encompass emerging crypto entities.

In a simultaneous action on October 12, as reported by Blockchain.News, the Commodity Futures Trading Commission (CFTC) also charged Stephen Ehrlich with fraud and registration failures, mirroring a wider regulatory effort to uphold legal and ethical standards in the burgeoning crypto space.

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Ripple CEO Warns SEC’s “Enforcement” Approach May Hurt US Crypto Industry

The CEO of Ripple, Brad Garlinghouse, has warned that the US Securities and Exchange Commission’s (SEC) approach to regulation is putting the US at risk of missing out on being a global hub for the next evolution of blockchain and crypto innovation. In a recent Bloomberg interview, Garlinghouse suggested that the SEC’s enforcement-focused approach, as opposed to working collaboratively with the industry, is not a healthy way to regulate an industry.

Garlinghouse noted that the SEC’s case against Ripple is an example of the regulator simply playing “offense” and “attacking” the industry as a whole, rather than taking a constructive approach to regulation. He added that if the SEC is “able to prevail,” there will be “a lot of other cases.” 

Garlinghouse argued that the crypto industry has “already started moving outside” of the US given its crypto regulation process is “behind” other countries such as Australia, UK, Japan, Singapore, and Switzerland. He commended these countries for taking “the time and thoughtfulness” to create “clear rules of the road,” and suggested that the US should follow suit in order to remain competitive. 

Garlinghouse believes that the framework process should begin with outlining clear protections for consumers. He added that consumers are suffering from the “lag,” as they don’t have the “same protection” that the regulatory frameworks can provide. 

Meanwhile, John Deaton, founder of legal news outlet Crypto Law Lawyer, recently put a call-to-action to his 245,000 Twitter followers, stating that all companies in “active litigation” with the SEC should collaborate and develop “coordinated strategies,” adding that it is “war.” This comes after Blockchain Association CEO, Kristin Smith, told Bloomberg in a Feb. 22 interview that the crypto regulation process in the US is happening “behind closed doors,” and that more industry involvement is vital in an “open process.” 


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