Global Weekly Fintech Update

15 March 2021

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.

You are welcome to share the round-up with colleagues who may like to subscribe.

CLIFFORD CHANCE PUBLICATIONS AND MATERIALS

SPOTLIGHT:

New York Attorney General warns virtual currency firms to register

Earlier this month, the Office of New York Attorney General Letitia James published an alert reminding the virtual currency industry that individuals and entities dealing in cryptocurrencies that are considered commodities or securities in the state of New York must register with the Attorney General. This follows a recent lawsuit by the Attorney General against Coinseed, Inc., and two of its executives, alleging that Coinseed – which offered a mobile app that functioned as a trading platform and allowed customers to trade virtual currencies – was required to register as a commodity broker-dealer, among other violations

GLOBAL LEGAL AND REGULATORY UPDATES

International

(4 Mar 2021) Financial Action Task Force guidance on the risk-based approach to anti-money laundering and counter-terrorist financing supervision. The guidance includes specific examples regarding the supervision of virtual asset service providers.

Americas

US:

(9 Mar 2021) Token Taxonomy Act re-introduced to Congress by Warren Davidson. The Bill (which was originally introduced as H.R.7365 in December 2018 and then again as H.R.2144 in April 2019) is intended to provide a bright line test for when a digital asset would be defined as a security. | Press release
(9 Mar 2021) Eliminate Barriers to Innovation Act 2021 introduced to Congress by Patrick McHenry and Stephen Lynch. The Bill seeks to establish a working group comprising industry experts and representatives from the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) to evaluate the current legal and regulatory framework around digital assets. The Bill is also intended to clarify when the SEC has jurisdiction over a particular cryptoasset (i.e. when it is a security) and when the CFTC has jurisdiction (i.e. when it is a commodity).
(1 Mar 2021) Speech by SEC Commissioner Hester Peirce on the barriers to introducing innovative technologies in traditional financial institutions, and how legacy firms and regulators can overcome them.
(1 Mar 2021) Letter from the Chairman of the Senate Committee on Banking, Housing and Urban Affairs, Sherrod Brown, to the Board of Governors of the Federal Reserve System, calling on the Federal Reserve to continue to explore the possibility of a US central bank digital currency (CBDC). Brown also voices concerns about the development of private stablecoins, such as Diem.

APAC

India:

(6 Mar 2021) Statement from the Minister of State for Finance, Anurag Thakur, in which he states the government needs to study the national security risks posed by virtual currencies before they can make a decision on their legality.

Republic of Korea:

(6 Mar 2021) Financial Services Commission announcement (in Korean) introducing fines for exchanges that fail to follow the legal requirements regarding virtual asset traders' internal controls, information and data retention, and identity verification processes.

Singapore:

(5 Mar 2021) Monetary Authority of Singapore circular on controls and disclosures to be implemented by licensed securities-based crowdfunding operators in relation to due diligence conducted on issuers, management of defaults, and disclosures to investors.

Thailand:

(8 Mar 2021) Bank of Thailand (BoT) update on the results of its CBDC Business Prototype Development Project. The project sought to assess how CBDCs could be used by the business sector to enhance the efficiency and flexibility of payments. BoT concluded that the use of distributed ledger technology (DLT)-based CBDCs could increase payment efficiency but that there were limitations regarding transaction privacy and the support of large transaction volumes.
(2 Mar 2021) The Securities and Exchange Commission has announced that the amended regulations governing the supervision of real estate-backed initial coin offerings have entered into force as of 1 March 2021. The regulations were revised in order to more appropriately reflect the nature, form and risk of the products. | Press release.

Europe

EU:

(11 Mar 2021) European Payments Council article on the Spunta project, an initiative promoted by the Italian Banking Association to explore the use of DLT for the interbank reconciliation of bilateral accounts.
(10 Mar 2021) EU Commission consultation on its roadmap for an EU-wide instant payments scheme. Responses are due by 7 April 2021.
(9 Mar 2021) EU Parliament Economic and Monetary Affairs (ECON) Committee draft report on the EU Commission's proposed regulation on markets in cryptoassets. The report, which was first published in German earlier in March, broadly supports the Commission's proposal, but argues that some changes could be made to the text, including making the opinions of the European Central Bank (ECB) and of Member States' central banks on a prospective issuer's application binding (rather than non-binding as in the Commission's proposal) and assigning the responsibility for deciding whether to authorise e-money tokens to the ECB.
(9 Mar 2021) ECON Committee draft report on the EU Commission's proposed regulation on a pilot regime for market infrastructures based on DLT. The report broadly supports the Commission's proposal, but makes various recommendations, including lowering the individual financial thresholds for DLT transferable securities, extending the scope of the regime to cover the DLT-based recording or trading of sovereign bonds and DLT exchange-traded fund units and reducing the initial duration of the pilot regime from five years to three years.
(5 Mar 2021) EU Agency for Network and Information Security report on cybersecurity initiatives in the financial sector. The report is intended to clarify the current status of these initiatives and to encourage collaboration by highlighting areas of overlap, gaps and potential synergies. | Press release

Malta:

(10 Mar 2021) Malta Financial Services Authority and Malta Digital Innovation Authority (MDIA) consultation on proposals to require applicants for virtual financial assets services licences to obtain innovative technology arrangement (ITA) certification through the MDIA as part of the application process. Responses are due by 30 March 2021. | Press release

UK:

(11 Mar 2021) Department for Digital, Culture, Media and Sport priorities for the UK tech sector, including the development of a national artificial intelligence strategy and the introduction of legislation designed to ensure that critical technologies are 'secure by design' from cyber threats.
(10 Mar 2021) Speech by the Right Honourable Sir Geoffrey Vos, Master of the Rolls, on technological challenges for English law and jurisdiction. The speech considers, in particular, the legal status of cryptoassets and smart contracts, digital dispute resolution rules and artificial intelligence.
(10 Mar 2021) Digital Regulation Cooperation Forum (DRCF) workplan for 2020/21. The DCRF is a collaborative initiative of the Competition and Markets Authority (CMA), the Information Commissioner's Office, the Office of Communications and the Financial Conduct Authority (FCA). The workplan sets out how the DRCF will collaborate on regulatory initiatives related to the digital economy.
(10 Mar 2021) Minutes from the Artificial Intelligence Public-Private Forum's second meeting, held on 26 February 2021. The Forum, which is a joint initiative of the Bank of England and the FCA, discussed the key issues and challenges around data quality, data strategy and economics, data governance, ethics and culture, and data standards and regulation.
(8 Mar 2021) Foreign Affairs Committee consultation on how the Foreign Commonwealth and Development Office (FCDO) should be supporting the UK's response to the opportunities and challenges presented by new and emerging technologies, including digital currencies. Responses are due by 11 May 2021. | Consultation webpage
(8 Mar 2021) FCDO guidance on sharing cybersecurity information across sectors. The guidance is intended to help Commonwealth countries, in particular, and forms part of the 2018 Commonwealth Cyber Declaration.
(5 Mar 2021) CMA consultation on the future oversight and governance of its open banking initiative. The initiative was established in 2017 to allow consumers and small and medium-sized enterprises to share bank account information with intermediaries so that the intermediaries can help find them better and more suitable financial products. The implementation phase of the initiative is nearing completion and the CMA is now consulting on oversight and governance arrangements. Responses are due by 29 March 2021. | Press release
(1 Mar 2021) FCA response to the Treasury Committee's consultation on the future of financial services. The FCA provides feedback on, among other things, the ways in which the UK can facilitate the emergence of fintech and incubate new financial technologies and firms.

CLIFFORD CHANCE EVENTS

Perspectives series: Post GameStop – a fresh look at market behaviour in the digital age (23 March 2021):
In the wake of the social media fuelled trading interest in GameStop and other assets, the focus of regulators is turning to whether this might have involved any breach of securities or commodities laws and whether increased regulation may be required around payments for order flow. Join us for our webinar where we will discuss these issues in the context of UK and US regulation of market behaviour, looking at key differences and what future regulation might involve. | To register, please see the event registration form.

Perspectives series: The shifting global regulatory outlook for stablecoins (25 March 2021):
Stablecoins – privately issued cryptocurrencies designed to have limited price volatility – have received growing attention since Facebook’s announcement of its proposed global stablecoin Diem (formerly Libra) in 2019 and the resulting regulatory backlash. Advocates hail them as an unmatched tool for financial inclusion and limiting financial crime, by linking payments to identity, while critics have concerns around regulatory standards and financial stability. Join us for this online panel session, in which our panellists will consider how the international regulatory response is evolving, how stablecoins can be successfully issued across key global financial centres and the risks and regulatory challenges to be aware of. | To register, please see the event registration form.

Additional Information

This publication does not necessarily deal with every important topic nor cover every aspect of the topics with which it deals. It is not designed to provide legal or other advice. Clifford Chance is not responsible for third party content. Please note that English language translations may not be available for some content.

The content above relating to the People's Republic of China (PRC) is based on our experience as international counsel representing clients in business activities in the PRC and should not be construed as constituting a legal opinion on the application of PRC law. As is the case for all international law firms with offices in the PRC, whilst we are authorised to provide information concerning the effect of the Chinese legal environment, we are not permitted to engage in Chinese legal affairs. Our employees who have PRC legal professional qualification certificates are currently not PRC practising lawyers.

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