Clifford Chance

Welcome to this week's global fintech round-up, summarising fintech regulatory developments that have happened around the world along with our Clifford Chance fintech publications and upcoming events. 

Details of these and previous developments can also be found on our Fintech Topic Guide on the Clifford Chance Financial Markets Toolkit.

SPOTLIGHT

Guide to Technology Disputes in Asia

In the second edition of our comprehensive guide to technology disputes in Asia Pacific, we explore the increasing range of tech legal disputes and what businesses can do to prepare for them. We consider key issues arising from technology protection, regulation and disputes, covering a broad range of areas from AML, fintech, sanctions, antitrust, fintech, responsible tech and product / contractual liability.

We also share guidance on the most effective way for firms to develop a robust strategy to deal with contentious issues including litigation and arbitration proceedings, and how to best protect and enforce IP, address data challenges and handle cybersecurity incidents.

CLIFFORD CHANCE BRIEFINGS AND MATERIALS

• (20 Feb 2023) Talking Tech – Data Centre Trends in 2023
• (16 Feb 2023) Talking Tech – Artificial Intelligence M&A and Fundraisings in 2023

GLOBAL LEGAL AND REGULATORY UPDATES, INDUSTRY GUIDANCE AND PUBLICATIONS

International

• (22 Feb 2023) Speech by General Manager of the Bank for International Settlements (BIS), Agustín Carstens, on innovation and the future of the monetary system. Carstens said that the events of 2022 had cast serious doubts on the ability of stablecoins to function as money, because they must import their credibility from sovereign fiat currencies and do not benefit from the regulatory requirements and protections that apply to bank deposits. However, he noted that stablecoins arose in part because some of the technical capabilities they provide cannot currently be met by existing forms of money. According to Carstens, it is therefore incumbent upon central banks to make sure they contribute to developing an infrastructure that meets these demands.
• (20 Feb 2023) BIS bulletin on crypto shocks and retail losses, which addresses three main issues surrounding the crypto market, building on a new database (Auer et al (2022)). First, it investigates trading behaviour by large and small investors around the world during the Terra/Luna and FTX meltdowns. Second, it assesses whether users made or lost money on their investments on average. And third, it analyses whether the market turmoil in crypto and decentralised finance (DeFi) in 2022 had any discernible effects on financial conditions in the broader financial markets outside the crypto universe. | Webpage
• (20 Feb 2023) Letter from Financial Stability Board (FSB) Chair Klaas Knot to G20 Finance Ministers and Central Bank Governors, in which he states that many existing stablecoins would not currently meet the FSB's forthcoming high-level recommendations for global stablecoin arrangements, nor would they meet the international standards and supplementary, more detailed BIS Committee on Payments and Market Infrastructures-International Organization of Securities Commissions guidance. The FSB intends to finalise its recommendations for the regulation, supervision and oversight of cryptoassets and markets and its recommendations targeted at global stablecoin arrangements by July 2023. In April, the FSB will also deliver a revised report to the G20 on achieving greater convergence in cyber incident reporting. A consultative document will be sent to the July G20 meeting aimed at strengthening financial institutions' ability to manage third-party and outsourcing risk. | Press release
• (16 Feb 2023) FSB report on the financial stability risks of DeFi. The report finds that while DeFi does not differ substantially from traditional finance in the functions it performs or the vulnerabilities to which it is exposed, the fact that the cryptoassets underpinning much of DeFi lack inherent value and are highly volatile magnifies the impact of these vulnerabilities when they materialise. The FSB intends carry out additional work to:
  • analyse the growth and implications of the tokenisation of assets, as it could increase linkages between cryptoasset markets/DeFi, traditional finance and the real economy;
  • explore approaches to fill data gaps to measure and monitor interconnectedness of DeFi, in collaboration with standard-setting bodies and regulatory authorities;
  • examine the extent to which the FSB’s proposed policy recommendations for the international regulation of cryptoasset activities may need to be enhanced to acknowledge DeFi-specific risks and facilitate the application and enforcement of rules; and
  • consider, in coordination with the standard-setting bodies, the regulatory perimeter across jurisdictions to determine which DeFi activities and entities fall or should fall within that perimeter. Press release

Africa

Zambia:

• (20 Feb 2023) Technology and Science Minister Felix Mutati has indicated that the Security Exchange Commission and Bank of Zambia are testing technology to enable the regulation of cryptocurrency in Zambia. Mutati said that the testing of the technology on regulating cryptocurrency will be upscaled in due course as part of a set of measures to achieve an inclusive digital economy for Zambia. | Press release

Americas

US:  

• (21 Feb 2023) New York State Department of Financial Services Superintendent Adrienne A. Harris has announced that the Department has enhanced its ability to detect fraud and other illegal activity among New York State-regulated entities engaged in virtual currency activity through new insider trading and market manipulation risk monitoring tools. | Press release
• (15 Feb 2023) Securities and Exchange Commission (SEC) proposed rule to expand and enhance the role of qualified custodians when registered investment advisers custody assets on behalf of their investors. The proposed rule would cover all cryptoassets, including those that are currently covered as funds and securities and those that are not funds or securities. | Statement by SEC Chair Gary Gensler

APAC

Australia:     

• (15 Feb 2023) The Australian Securities & Investments Commission (ASIC) has announced that it will expand its enforcement focus areas in the coming year, targeting sustainable finance practices and disclosure of climate risks, financial scams, cyber and operational resilience, and investor harms involving cryptoassets. | Press release

Hong Kong:

• (20 Feb 2023) Securities and Futures Commission (SFC) consultation on the proposed requirements for operators of virtual asset trading platforms. Under a new licensing regime to take effect on 1 June 2023, all centralised virtual asset trading platforms carrying on business in Hong Kong or actively marketing to Hong Kong investors will need to be licensed by the SFC. As part of the consultation, the SFC is seeking views on whether to allow licensed platform operators to serve retail investors, and if so, the measures to be implemented in addition to the proposed range of investor protection measures, which include ensuring suitability in onboarding clients and token admission.| Press release

Japan:           

• (17 Feb 2023) Opening remarks by Bank of Japan Executive Director, Shinichi Uchida, at the Fifth Meeting of the Liaison and Coordination Committee on Central Bank Digital Currency (CBDC), in which he announced that the Bank of Japan will be launching a digital yen pilot programme in April 2023. The aim of the pilot programme is twofold: first, to test the technical feasibility not fully covered by the proofs of concept, and second, to utilise the skills and insights of private businesses in terms of technology and operation for designing a CBDC ecosystem in the possible event of social implementation.

Europe

EU:  

• (20 Feb 2023) EU Commission written answer to EU Parliament question on (i) how the Markets in Crypto-Assets Regulation (MiCA) will protect investors and consumers more generally against irresponsible advertising practices used to sell cryptoassets including, but not limited to, celebrity endorsements of particular assets and (ii) whether the Commission will permit Member States to introduce additional regulation on these irresponsible advertising practices.

Middle East

Oman:

• (14 Feb 2023) The Capital Market Authority (CMA) has announced its plans to establish a new regulatory framework for virtual assets and virtual asset service providers (VASPs). The framework will include a new regulation to cover all virtual assets activities, a licensing framework for all VASP categories and a supervisory framework to identify, assess, and mitigate ongoing risks. | Press release