Do Stablecoin Patent Applications Signal a Cryptocurrency Evolution?
Stablecoins have emerged as one of the most transformative innovations in the cryptocurrency space, bridging the gap between the volatility of traditional cryptocurrencies like Bitcoin and the stability demanded by mainstream financial systems. This rise has brought with it a wave of innovation, and nowhere is this more apparent than in the growing number of patent applications for stablecoin technologies.
From algorithmic stabilization techniques to cross-border payment systems, the innovations behind these patent applications pave the way for a more stable crypto-economy. But what do these patent filings tell us about the future of stablecoin adoption? Are they merely defensive strategies by crypto traders and institutions, or do they hint at broader shift toward stablecoin integration into mainstream financial systems?
Background on Stablecoins
By way of background, stablecoins are cryptocurrencies designed to maintain a stable value, typically by pegging their price to a reserve asset such as fiat currency (e.g., the U.S. dollar), a commodity (e.g., gold), or even a basket of assets (e.g., using algorithms and smart contracts to regulate supply and stabilize value without collateral). Unlike traditional cryptocurrencies, which are prone to price volatility, stablecoins aim to combine the benefits of blockchain technology—such as transparency and decentralization—with price stability. Stablecoins have become a focal point for both financial and technological advancement, driving an increase in stablecoin patent applications since their inception in 2014.
The Growth of Stablecoin-Related Innovations
The adoption of stablecoins has sparked significant innovation, as reflected in the growing number of blockchain patent applications filed worldwide, with the majority being filed in the U.S. and China. Companies and financial institutions are increasingly vying to protect their proprietary technologies in this competitive space.
Although there were early pioneers in the stablecoin space as early as 2014, stablecoins gained widespread traction in subsequent years, particularly with the introduction of the widely popular Ethereum-based stablecoins like DAI in 2017. Between 2017 to 2020, the number of blockchain and stablecoin related patent applications surged, including innovations covering algorithmic stability mechanisms, smart contract frameworks, and regulatory compliance systems. Blockchain-related patent applications, including those specific to stablecoins, peaked in 2020.
Challenges and Recovery in Stablecoin Innovation
Between 2021 to 2022, cryptocurrencies struggled to compete with inflation, leading to the devaluation and collapse of several cryptocurrencies and stablecoins. While these downward pressures impacted innovation in stablecoin technologies, stablecoin-related intellectual property saw a resurgence in 2024 with an increase in blockchain and stablecoin related patent applications. Despite fluctuations, overall blockchain and stablecoin patent activity remains robust as interest in stablecoins and cryptocurrencies remains strong.
For example, earlier this month, Ripple, the creator of open source blockchain XRP, announced its plans to launch a stablecoin following its receipt of regulatory approval. This announcement resulted in an 11% surge in XRP’s value within 24 hours of the disclosure. This upward trend in stablecoins reflects the maturation and evolution of the cryptocurrency industry, signaling a shift toward wider institutional acceptance and broader utility.
The interest in stablecoin-related patents signals several key trends in the evolution of cryptocurrency:
Institutionalization of Cryptocurrency – Increasing involvement of financial institutions and regulatory oversight.
Regulatory Focus and Compliance – Emphasis on compliance to meet global regulatory standards.
Decentralized Finance and Innovation – Expansion of decentralized financial applications powered by stablecoins.
Global Adoption and Competition – A race among nations and corporations to lead in stablecoin technology and integration.
The Role of Stablecoins in the Future of Finance
The growth of stablecoin-related patent applications and intellectual property is a cornerstone of the evolving cryptocurrency landscape. Stablecoins have the potential to play a vital role in bridging traditional and digital finance, thereby enabling faster, more efficient transactions while adhering to the demands of regulators and consumers alike.
For businesses and innovators, this presents a dual opportunity: capitalize on the growing demand for stablecoins and protect innovations through strategic patent filings. As the cryptocurrency ecosystem continues to mature, stablecoins are poised to be at the forefront of this transformation, driving new opportunities for innovation and adoption.
US and UK Memorialize Cooperation on Economic Sanctions Enforcement
Go-To Guide
OFAC and OFSI signed an agreement to share information and cooperate on economic sanctions enforcement.
The agreement formalizes existing collaboration practices between the US and UK agencies.
Information sharing may include investigation details, potential violators, and sanctions compliance best practices.
On 13 January 2025, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) and the UK’s Office of Financial Sanctions Implementation (OFSI) (collectively, the Participants) published an information-sharing Memorandum of Understanding (MoU), which was signed and took effect on 9 October 2024. The MoU memorializes the strong collaboration between the USA and UK in investigating and enforcing economic sanctions and promoting compliance with economic and trade sanctions.
US and UK Information Sharing
The MoU largely reflects activities that the United States and UK have undertaken for some time, but particularly since Russia’s invasion of Ukraine in early 2022. The MoU confirms that cooperation in implementing and enforcing economic sanctions may include sharing relevant information, conducting coordinated investigations, training personnel, considering regulatory expectations, conducting economic analysis, and other practical arrangements as may be developed. “Information” is widely defined, and includes:
i.
documents retained in an administrative record as part of an investigation, including, but not limited to, responses to administrative subpoenas and requests for information, evidentiary exhibits, case summaries, and witness interviews and testimonies;
ii.
identifying information of or relating to persons involved in a suspected or actual violation of either Participant’s sanctions regulations, along with a verbal or written description of the potential violation(s) and/or a copy of the disclosure;
iii.
transaction-related reporting, including, but not limited to, reports made pursuant to a specific or general authorisation or licences, and reports of blocked property or frozen assets;
iv.
certain information and/or documents disclosed as part of a specific licence application;
v.
training materials on the Participants’ sanctions authorities and best practices related to business processes, work methodologies, and staff training;
vi.
reporting statistics and economic analysis;
vii.
the relevant names of persons or entities who have been or may soon be subject to administrative actions or other agency actions; and
viii.
other unclassified information obtained in connection with the Participants’ respective responsibilities and authorities.
The MoU confirms that, while the relevant bodies may decline to share information for any reason, OFAC and OFSI staff will be encouraged to “maintain ongoing, ad hoc communications” with one another, and that staff will be seconded from one to the other. Such secondments have already been common practice between OFAC and OFSI as part of the collective response to Russia’s invasion of Ukraine.
Potential Implications for UK Businesses
The increased collaboration between OFAC and OFSI creates opportunities for increased coordination and consistency in implementing the economic sanctions measures. It also creates some potential enhanced risk for entities with international business operations, as the agencies will share resources and information related to suspected violations and investigative matters. The MoU underlines the importance of international businesses’ continued implementation and maintenance of appropriately risk-based economic sanctions compliance programs to comply with applicable sanctions regimes and mitigate the risks of even inadvertent violations. Economic sanctions laws are generally subject to a strict liability standard (which may result in civil or administrative penalties), and in the case of intentional violations, such as evasion or circumvention, criminal penalties may be imposed against individuals as well as corporates.
Takeaways
The MoU’s release at the beginning of the year serves as a reminder for international businesses to review their compliance programmes. Companies with operations in the UK, United States, or both should consider both UK and U.S. sanctions requirements. The MoU highlights the importance of regular compliance programme reviews and staff training on financial sanctions and export controls, as well as the potential consequences of even inadvertent violations.
CFPB Plans Personal Lender Oversight, Funds Access Rules
The Consumer Financial Protection Bureau (CFPB) said it plans to pursue rulemaking aimed at increasing the availability of deposited funds at banks and bringing larger non-bank personal lenders under the agency’s supervision. The intention for rulemaking responds to a 2022 petition for rulemaking and a 2023 request submitted by a Brookings Institution fellow. After the CFPB released its plan, President Donald Trump’s executive order, titled “Regulatory Freeze Pending Review,” directs federal agencies to stop all rulemaking activity pending within the agency and to consider all rules already published as paused for 60 days.
Regulation CC
The proposed rulemaking may be complex, as it would impact Regulation CC, which is under the purview of the CFPB and the Federal Reserve. Regulation CC implements the Expedited Funds Availability Act, a 1987 law that governs the holds banks place on incoming deposits prior to making the funds fully available for consumer use. Under Regulation CC, the Federal Reserve and CFPB are required to set holding periods and reduce those periods to “as short a time as possible” based on payment and check processing speeds.
No regulations impacting Regulation CC have been issued since President Reagan signed the Expedited Funds Availability Act in 1987. The CFPB has stated that the comments received in response to the petition for rulemaking support a rule that would examine reducing hold times. When contemplating rulemaking, the CFPB would need to take into account fraud considerations for clearing checks.
Supervision of Larger Non-Banks in the Personal Loan Market
The petition for rulemaking proposed that the CFPB begin a rulemaking to define “larger participants” in the non-bank personal loan market, which would subject larger non-banks to the CFPB’s supervisory authority. “The CFPB has supervisory authority over both nonbanks and very large banks in most segments of consumer lending – including mortgages, auto finance, and private education loans – but not the entirety of the personal loan market, where the CFPB generally only has supervisory authority over large banks and nonbank payday lenders.” While banks provide a substantial portion of personal loans in the form of credit cards, there is a large portion of non-banks that make up the personal loan market. There are approximately 85 million accounts and over $125 billion in outstanding balances, which the CFPB noted warrants proposed rulemaking. The CFPB already supervises certain non-bank participants in the payday loan market (e.g., traditional payday loans or online or app-based payday loans that are sometimes marketed as “earned wage” products).
The CFPB has not provided a timeframe for its proposed rulemaking.
5 Trends to Watch in 2025: United Arab Emirates
Abu Dhabi Continues to Host International Sporting Events – For the third year in a row, the NBA came to Abu Dhabi in 2024. The 2024 showcase included the Boston Celtics and Denver Nuggets facing off in two pre-season games in October at the Etihad Arena on Yas Island, bringing NBA excitement to the United Arab Emirates capital. In May 2025, Abu Dhabi will host the EuroLeague basketball’s “Final Four” tournament—the first time the event has been staged outside of Europe. As with the NBA, EuroLeague is planting its footprints in the region, and they will likely take advantage of top-class infrastructure, professional support services, and a growing fan base, with festivities including dynamic fan engagement opportunities and multi-day matches.
M&A Trends in the UAE’s Corporate Transactional Landscape and AI Advancements –In 2025, the UAE’s corporate transactional landscape is expected to be driven by notable external and internal factors. A key trend will be the rise in outbound M&A activity, as UAE-based sovereign wealth funds and private investors look to deploy capital into international markets, particularly the United States. This trend is likely to be influenced by recent changes in the U.S. administration, which could present more favorable conditions for investment, particularly in technology, infrastructure, and health care sectors. As a result, UAE investors are expected to pursue strategic acquisitions to diversify their portfolios and gain access to high-growth sectors in developed markets. Simultaneously, the UAE is poised to emerge as a global leader in artificial intelligence innovation. The country’s ongoing investments in AI infrastructure, research, and development, coupled with its commitment to fostering a business-friendly ecosystem, will likely accelerate its attraction of top-tier AI companies, startups, and talent from around the world. As a result, the UAE is positioned to become a key hub for AI technology development, contributing to both regional and global advancements in industries such as finance, health care, and manufacturing, while providing fertile ground for corporate ventures and strategic partnerships in this rapidly evolving field.
Capital Markets Trends in the UAE –Two major trends are expected to shape the UAE capital markets in 2025. Lower interest rates have resulted in a substantial increase in debt capital market offerings across the entire bond spectrum, including Sharia-compliant sukuk offerings. The trend is gaining momentum, and we expect the debt capital market to grow substantially in 2025. We expect the equity capital market to be shaped by the following trends: an increased number of IPOs by non-government-related entities, including a number of tech companies; secondary offerings by listed companies in the form of accelerated non-documented block trades as well as fully documented equity offerings; and an increased focused on dual listing structures between the UAE and other countries, driven in particular by regulatory efforts of the Dubai Financial Market (DFM) and the Abu Dhabi Securities Exchange (ADX).
The Growth of Private Credit and the Possible Impact of AAOIFI Standard 62 on the UAE Finance Market –As creditors continue to look across the global market for strategic opportunities, the UAE further developed as a hub for private credit providers in 2024 and we have seen an increased appetite for both international and regional credit funds to operate in the UAE and the wider Middle East, resulting in a number of high-profile private credit transactions closing during the year. Historically, the market has been dominated by local financial institutions offering relationship-based lending to local corporate entities, however the market terms that have evolved within the UAE as a result of regional bank market dominance have created a regime that has become of particular interest to a number of private credit providers. Given this, as banks and financial institutions continue to gain more share of the leveraged market in 2025 and private credit providers continue to search for opportunities, we expect the importance of private credit to continue to grow within the UAE (and the wider Middle East) in 2025 and beyond.
The Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), which sets the standards in the Islamic finance industry, is considering new guidelines on sukuk (fixed income instruments that comply with Sharia principles). Standard 62, if enacted, would transform how sukuk are structured and treated in accounting and financial reporting processes, and would bring with it significant implications for issuers and investors. As it stands, sukuk are asset-based, but not asset-backed, meaning that investors are notionally exposed to the assets’ performance risk, but do not bear any direct financial or legal risk tied to those assets. Standard 62 would change this by transferring full ownership and risk of the underlying assets to the investors. Rather than resembling bonds (as they do currently), sukuk would be treated more like securitized assets, altering the risk dynamics for issuers and investors such that investors would bear the full risk of the underlying assets’ performance and no longer be protected from the specific performance of those assets. This reclassification could deter issuers, potentially limiting the volume of capital raised in the sukuk market, although much will depend on how the new rules (if enacted) are interpreted and implemented in practice. Issuers and investors will need to closely monitor developments in the coming months.
The UAE Remains one of the Most Vibrant Markets for the Real Estate and Construction Industry – The future of the real estate and construction industry in the region is filled with opportunity, with the primary goal of establishing the region as the preeminent location for investment and growth. The UAE continues to invest heavily in tourism and hospitality, with significant developments in luxury hotels, resorts, and entertainment complexes. One of the largest growing areas in the development space is branded residences (of which there are over 700 projects globally), which command higher yields for both owners and operators and diversify the real estate market. This trend is expected to continue into 2025, with ongoing and upcoming projects totaling over U.S. $100 billion in value, including state-sponsored infrastructure projects and landmark real estate developments. As of 2024, the top three causes of disputes in the region remain design-related, with scope change at 52.9%, late design at 32.1% and incomplete design at 26.3% (versus 31.8%, 17.9% and 11.3%, respectively, in the rest of the world) according to the CRUX 2024 report. The technological advancements used in the UAE construction market (for instance, AI, robotics, wearable IoT trackers, and augmented reality outlays) are likely to have an impact on the labour market. A key trend seen in state-sponsored projects is the increasing demand by international contractors and investors for early advice on the structuring of their local construction arms to benefit from investment treaty protections. Careful (legal and technical) early assessments of the time, cost, and quality risks are increasingly adopted by key market players in the UAE.
UPDATE: CTA Filings Remain Voluntary After Supreme Court Ruling (For the Moment)
On January 23, 2025, the Supreme Court of the United States acted to lift one of the effective nationwide injunctions on enforcement of the Corporate Transparency Act (CTA) in the Texas Top Cop Shop v. McHenry [originally Garland]case. That case was put into place by a federal district court in the Eastern District of Texas on December 3, 2024 and was subsequently appealed to the Fifth Circuit Court of Appeals, and then an application was made to the Supreme Court to stay the injunction.
A second court, Smith v. Treasury (also in the Eastern District of Texas), issued an order on January 7, 2025, after the Texas Top Cop Shop v. McHenry case was before the Supreme Court. The judge in Smith v. Treasury issued his own nationwide injunction of the CTA, on substantially similar facts and arguments as those found in Texas Top Cop Shop v. McHenry. This injunction remains in place for the moment.
FinCEN, in response to the Supreme Court ruling, issued a press release on January 24, 2025, indicating that its position is that reporting companies are not currently required to file beneficial ownership information reports with FinCEN and are not subject to liability if they fail to file this information, “while the Smith order remains in force.”
In accordance with FinCEN’s latest guidance, reporting companies may continue to voluntarily submit BOIR filings with FinCEN. Parties should remain prepared to file when and if the CTA filing obligations are reinstated in full. We will continue to follow developments and provide updates (please subscribe here).
New FDIC Chairman Outlines Agency’s New Priorities
The FDIC will shift its focus and priorities under the leadership of its new Acting Chairman, Travis Hill. In a statement released on January 20, 2025, Chairman Hill signaled a potential departure from some of the initiatives of the prior FDIC leadership. In the statement, he explained his key priorities for the agency moving forward, which include:
Rethinking the agency’s regulatory approach. Hill expressed concerns that existing regulations, guidance, and manuals may be overly burdensome to innovators. He plans to conduct a comprehensive review of these materials to ensure agency guidance promotes a vibrant and growing economy. This review may lead to the withdrawal of certain proposals, such as those related to brokered deposits and corporate guidance, which were a focus of the previous administration.
Streamlining supervisory efforts. Hill emphasized the need to focus supervisory efforts on core financial risks rather than ensuring compliance with overly burdensome processes. He also aims to streamline the supervisory process to reduce the regulatory burden on banks.
Modernizing resolution practices. Hill highlighted the need to learn from the costly bank failures of 2023 and improve the FDIC’s readiness to resolve large financial institutions that are in financial distress. This will involve the agency being more proactive and nimble and improving the bidding process for the acquisition of failed banks, ensuring the FDIC is better equipped to handle future challenges.
Balancing growth and safety. Hill acknowledged the need to balance driving economic growth with ensuring safe financial practices. He indicated that the FDIC would consider adjustments to its capital and liquidity rules to achieve this balance, potentially leading to changes to banks’ capital requirements.
Putting It Into Practice: Chairman Hill’s statement suggests a shift in the FDIC’s regulatory approach, which could represent a notable departure from enforcement patterns and guidance under prior FDIC leadership (previously discussed here, here, and here). The primary focus Hill’s statement appears to be cutting unnecessary red tape and emphasis on the promotion of innovation and economic growth. This could mean a more favorable business environment for banks, particularly those engaged in fintech partnerships or other innovative activities.
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Maryland Expands Licensing Requirements for Mortgage Loan Assignees
On January 10, 2025, the Maryland Office of Financial Regulation (OFR) issued guidance significantly expanding licensing requirements for assignees of residential mortgage loans in Maryland. The guidance stems from an April 2024 court ruling and raises important considerations for entities involved in the secondary mortgage market.
Maryland’s licensing laws did not explicitly require a license to purchase closed and funded residential mortgage loans. However, in April 2024, the Appellate Court of Maryland ruled that an assignee of a home equity line of credit was required to obtain a license to have the legal authority to bring a foreclosure action.
The OFR’s new guidance expands upon this ruling, asserting that any assignee of residential mortgage loans, including “passive trusts,” must obtain a license under Maryland mortgage lending laws in order to acquire or obtain assignments of any mortgage loans. This applies regardless of lien position and whether the loans are open- or closed-end extensions of credit. The court highlighted that exempting assignees from these requirements would undermine consumer protection statutes designed to ensure that entities involved in mortgage lending possess the requisite oversight.
Some key takeaways from the OFR’s guidance are:
Passive trusts are subject to licensing requirements. The guidance defines a “passive trust” as a trust that acquires mortgage loans serviced by others, does not originate loans, and does not act as a mortgage broker or servicer. These trusts are now required to obtain a license to acquire or assign mortgage loans in Maryland.
Emergency regulations facilitate licensing for mortgage trusts. The OFR has issued emergency regulations to streamline the licensing process for mortgage trusts, recognizing the potential impact of the new requirements on the secondary mortgage market.
Enforcement is temporarily suspended, but action is recommended. While the OFR intends to suspend enforcement of these licensing obligations until April 10, 2025, the guidance recommends that affected parties should audit their portfolios and submit license applications promptly to ensure compliance.
Putting It Into Practice: This expansion of the applicability of licensing requirements could significantly impact the operations of state banks in Maryland. These banks may need to re-evaluate their procedures for acquiring and selling mortgage loans, raising the potential need for such banks to obtain additional licenses or adjust their loan trading practices. The guidance could also mean increased compliance costs and operational burdens for affected banks.
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Trump Administration Issues Regulatory Freeze
On January 20, President Trump issued a memorandum instituting a regulatory freeze pending review. This action, a common practice for new administrations, directs federal agencies to halt any new rulemaking until agency heads appointed by the incoming president have reviewed and approved pending regulations. The freeze has significant implications for the financial services industry.
The freeze applies to a wide range of regulations passed by federal agencies in recent months, including recent rule proposals from the CFPB affecting brokers of consumer data, and buy now, pay later lenders, among other market players (previously discussed here, here, and here).
The memorandum outlines several key directives for agencies, including:
Halting new rulemaking. Agencies are prohibited from proposing or issuing any new rules until they have been reviewed and approved by an agency head appointed by President Trump. This ensures that new regulations align with the administration’s policy priorities.
Withdrawing pending rules. Rules that have already been submitted to the Federal Register but not yet published must be withdrawn for review. This allows the new administration to scrutinize pending regulations and potentially make changes or withdraw such regulations altogether.
Postponing recently published rules. Rules that have already been published in the Federal Register but not yet in effect will be postponed for 60 days to allow for review.
Allowing for exceptions. The Director of the Office of Management and Budget (OMB) has the authority to exempt certain rules from the freeze. Such exceptions apply to rules addressing emergencies or urgent situations where immediate action is necessary, such as those related to financial instability or market disruptions.
This regulatory freeze will allow the Trump Administration to evaluate existing regulations and ensure alignment with policy directives of President Trump’s newly appointed agency heads.
Putting It Into Practice: The freeze puts a halt to several rule proposals from the CFPB over recent months. With a changes of leadership for the CFPB and other federal regulators on the horizon, such federal agencies may see significant changes to their rulemaking and enforcement agendas. Financial institutions should closely monitor the new CFPB Director’s stance on these pending rules and any potential revisions or withdrawals, as these decisions could reveal the direction the Trump Administration will take regarding consumer financial protection and the scope of the CFPB’s authority.
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CFPB Takes Action Against Illinois Mortgage Lender for Redlining Violations
On January 17, 2025, the CFPB filed a complaint against an Illinois-based non-depository mortgage lender for allegedly engaging in discriminatory practices. The CFPB alleges the lender engaged in improper redlining by deliberately excluding certain neighborhoods from its services based on the racial and ethnic composition of those areas, in violation of the Equal Credit Opportunity Act (ECOA).
The CFPB claims the lender violated ECOA by engaging in a pattern of discriminatory conduct against applicants on the basis of race or nationality. Specifically, the CFPB alleges the lender:
Concentrated office locations and marketing efforts in majority-white neighborhoods. The CFPB alleges the lender intentionally avoided locating offices and marketing its services in majority-Black and Hispanic neighborhoods in the Chicago and Boston metropolitan areas.
Discouraged prospective minority applicants. The lender allegedly engaged in practices that discouraged borrowers from applying for mortgage loans to purchase properties in majority-Black and Hispanic neighborhoods.
Failed to maintain sufficient training and compliance monitoring. The lender’s employees allegedly received little to no training on fair lender laws and regulations. The lender also allegedly failed to adequately monitor employee conduct for compliance with fair lender laws and did not perform any internal analyses to monitor for redlining.
The CFPB asserts that these actions resulted in a disproportionately low number or mortgage applications and loan originations from majority-Black and Hispanic neighborhoods.
To address these alleged violations, the CFPB is seeking a court order that would:
Ban the lender from engaging in mortgage lending for five years. This would prohibit the lender from engaging in any residential mortgage lending activities or receiving compensation for any such mortgage lending activities.
Impose a $1.5 million civil penalty. The penalty would be deposited into the CFPB’s victims relief fund to provide financial relief to harmed consumers.
Putting It Into Practice: This action is the latest of a flurry of redlining settlements by federal regulators in advance of the administration change (previously discussed here and here). It remains to be seen how the Trump Administration will approach ECOA enforcement. Lenders should nonetheless ensure their fair lender compliance protocols align with federal regulators’ standards and expectations.
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DOJ Announces Modest Increase in FCA Recoveries, Fueled Largely by Whistleblower Lawsuits
The Department of Justice (“DOJ”) recently announced a modest increase in monetary recoveries for 2024 from investigations and lawsuits under the False Claims Act (“FCA”), which is the Government’s primary tool for combating fraud, waste, and abuse. In fiscal year 2024, the DOJ recovered over $2.9 billion from FCA settlements and judgments, marking a 5% increase over 2023’s total and the highest amount in three years. Recoveries were fueled largely by qui tam lawsuits previously filed by whistleblowers, which contributed to $2.4 billion of the $2.9 billion recovered. The number of qui tams filed last year was also the highest ever in a single year at 979 cases. While health care fraud continues to be the primary source of enforcement activity, the rise in lawsuits stemmed from non-health care related cases. This underscores the Government’s and private citizens’ intensified enforcement efforts through FCA investigations and litigation in both the health care sector and beyond.
FCA Recoveries by the Numbers
While the nearly $3 billion recovered last year resulted from a record-breaking number of 566 settlements and judgments, last year’s haul remains well below peak year recoveries, such as 2014’s $6.2 billion and 2021’s $5.7 billion. The following chart illustrates the FCA recoveries by fiscal year, showcasing monetary trends over the past decade.
Key Enforcement Areas
In announcing 2024’s recoveries, the Government highlighted several key enforcement areas, such as:
The opioid epidemic. The Government continues to pursue health care industry participants that allegedly contributed to the opioid crisis, focusing primarily on schemes to market opioids and schemes to prescribe or dispense medically unnecessary or illegitimate opioid prescriptions.
Medicare Advantage Program (Medicare Part C). As the Medicare Advantage Program is the largest component of Medicare in terms of reimbursement and beneficiaries impacted, the Government stressed this remains a critical area of importance for FCA enforcement.
COVID-19 related fraud. Given the historic levels of government funding provided as a result of the COVID-19 pandemic, the Government also continues to pursue cases involving improper payment under the Paycheck Protection Program as well as false claims for COVID-19 testing and treatment. Close to half of 2024’s settlements and judgments resolved allegations related to COVID-19.
Anti-Kickback Statute and Stark Law violations. Cases premised on alleged violations of the AKS and Stark Law remain a driving force in FCA litigation for health care providers. In the last several years, there seems to be renewed interest in Stark Law enforcement, in particular.
Medically unnecessary services. The provision of medically unnecessary health care services also remains a widely-used theory of FCA liability, despite this being a historically challenging enforcement area often involving disputes over subjective clinical decisions.
The EU’s Digital Operational Resilience Act Comes Into Effect
The European Union’s Digital Operational Resilience Act (DORA) came into effect on January 17, 2025. DORA aims to harmonise rules concerning the provision of information and communication technology (ICT) services to regulated financial institutions and ensure they are capable of maintaining their operations through periods of severe disruption.
Quick Hits
The EU Digital Operational Resilience Act (DORA) aims to enhance security and resilience for financial institutions across Europe, protecting them from severe operational disruptions, such as cyberattacks or information and communication technology (ICT) incidents.
DORA applies to a wide range of financial entities, including banks, insurance companies, investment firms, credit agencies, crypto-asset service providers, and ICT third-party service providers used within the financial sector.
The European Supervisory Authorities (ESAs) have the authority to impose fines for noncompliance as of January 17, 2025.
DORA applies to financial entities operating within the EU and their critical third-party technology service providers supporting them, including those outside the EU. Under DORA’s mandate, financial market participants are subject to strict and complex requirements for various aspects of ICT risk management. These obligations range from reporting and incident management to resilience testing and third-party risk management.
Key Measures
Financial entities within the scope of DORA must adopt and comply with obligations, including the following:
Developing and maintaining a comprehensive ICT risk management framework capable of classifying, monitoring, preventing, or mitigating ICT-related risks, with regular reviews and internal audits.
Establishing processes for reporting ICT-related or major incidents to the relevant supervisory authorities. National authorities will have to submit registers to ESAs by the end of April 2025.
Developing and regularly reviewing ICT third-party risk management strategy, including mandatory provisions in contracts with ICT service providers and a registry of information documenting all existing contractual arrangements.
Enforcing a digital operational resilience testing program that includes a range of assessments and tools.
Encouraging financial entities to share information and intelligence about known cybersecurity risks.
DORA will apply directly to service providers designated as critical to the sector. It is not anticipated that essential ICT third-party service providers will be designated under DORA before the third quarter of 2025. Nonetheless, any service provider that fulfils the requirements for a critical third-party service provider level 2 may want to evaluate its operational processes in accordance with DORA specifications.
DORA is not directly applicable in the United Kingdom; however, the provisions will apply to UK organisations that have operations or interactions within the EU. In the UK, on January 1, 2025, the Policy Statement 16/24 issued jointly by the Financial Conduct Authority and the Prudential Regulation Authority, “Operational resilience: Critical third parties to the UK financial sector,” took effect, implementing similar resilience requirements for critical third parties operating within the UK.
AB 238 Mortgage Deferment Act for California Wildfire: Mortgage Forbearance Relief
AB 238, also referred to as the Mortgage Deferment Act, to add Title 19.1§ 3273.20 et seq. (the “Mortgage Deferment Act” or the “Act”), was introduced in the California legislature on January 13, 2025 to provide essential financial relief to the victims of the Los Angeles County wildfires (including the Palisades and Eaton fires) that continue to burn in multiple locations throughout Southern California. The Mortgage Deferment Act may be heard in committee on February 13, 2025. If implemented, the Act is intended to provide financial relief to those who have lost their homes or livelihood to wildfires by allowing borrowers to request mortgage payment forbearance for up to 360 days, in two increments of 180 days each.
The Mortgage Deferment Act is modeled after the CARES Act, which provided similar forbearance relief to those experiencing financial hardship during the COVID-19 pandemic. To effectuate a request under the Act as currently drafted, the borrower[1] must submit a request for forbearance to the borrower’s mortgage loan servicer and affirm that the borrower is experiencing a financial hardship due to the wildfire disaster. Id. at § 3273.22(a). No additional documentation is required for a request for forbearance, other than the borrower’s attestation to a financial hardship caused by the wildfire disaster. Id. at § 3273.23(a).
Upon receipt of such a request, the mortgage servicer must provide the borrower a forbearance for up to 180 days, which may be extended for an additional period of up to 180 days at the request of the borrower. Id. at § 3273.22(b). Additionally, the mortgage servicer must communicate with the borrower to whom a forbearance has been granted to ensure that the borrower understands that the missed mortgage payments must be repaid, although they may be paid back over time. Id. at § 3273.23(a)-(b).
The proposed legislation prohibits the assessment of additional fees, penalties, or interest beyond scheduled amounts. It also requires an immediate stay of foreclosure efforts, and extends to all aspects of the foreclosure process, including foreclosure-related eviction. Moreover, during the forbearance period, the Mortgage Deferment Act prohibits a mortgage servicer from initiating any judicial or nonjudicial foreclosure process, moving for a foreclosure judgment or order of sale, or executing a foreclosure-related eviction or foreclosure sale. Id. at § 3273.24.
If the Mortgage Deferment Act is implemented, it will be of the utmost importance for mortgage servicers to work closely with borrowers who may have been impacted by the wildfire disaster in California. Servicers should also ensure that borrowers requesting forbearance are properly informed that any missed mortgage payments pursuant to the borrower’s forbearance request ultimately will be required to be repaid to the mortgage servicer. Further, upon implementation, any failure to properly adhere to the Mortgage Deferment Act by mortgage servicers could have significant negative consequences, which could include litigation and/or compliance issues. Servicers should monitor the status of the Act, to ensure that they are prepared to fully comply with its terms, should the Act become law.
[1] The Mortgage Deferment Act, as currently drafted, includes various proposed definitions. “Borrower” is defined as a natural person who is a mortgagor or trustor or a confirmed successor in interest, or a person who holds a power of attorney for a mortgagor or trustor or a confirmed successor in interest. Mortgage Deferment Act § 3273.21(a). “Mortgage loan” is defined as a loan that is secured by a mortgage and is made for financing, including refinancing of existing mortgage obligations, to create or preserve the long-term affordability of a residential structure in the state, or a buy-down mortgage loan secured by a mortgage, of an owner-occupied unit in this state. Id. at § 3273.21(b). “Mortgage servicer” means a person or entity who directly services a loan or who is responsible for interacting with the borrower, managing the loan account on a daily basis, including collecting and crediting periodic loan payments, managing any escrow account, or enforcing the note and security instrument, either as the current owner of the promissory note or as the current owner’s authorized agent. Id. at § 3273.21(c). “Wildfire disaster” means the conditions described in the proclamation of a state of emergency issued by California Governor Gavin Newsom on January 7, 2025. Id. at § 3273.21(d).