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.

CLIFFORD CHANCE BRIEFINGS AND MATERIALS

• (5 Jul 2022) Talking Tech article – Developers can now let an artificial intelligence (AI) assistant write code for them – but what are the intellectual property implications?
• (1 Jul 2022) Talking Tech article – Markets in Cryptoassets (MiCA): EU reaches agreement on cryptoassets regulation

GLOBAL LEGAL AND REGULATORY UPDATES, INDUSTRY GUIDANCE AND PUBLICATIONS

International

• (5 Jul 2022) Bank for International Settlements paper on the interdependencies inherent in big tech business models and the potential regulatory implications. | Summary
• (30 Jun 2022) Basel Committee on Banking Supervision consultation on the prudential treatment of banks' cryptoasset exposures. The consultation seeks feedback on, among other things, proposals to add provisions to the Basel Framework on the treatment of 'Group 1' cryptoassets (i.e. those which have stabilisation mechanisms or are tokenised versions of traditional assets), and to introduce requirements on the treatment of 'Group 2' cryptoassets (i.e. those that do not meet the criteria of Group 1), including restricting banks' exposures to them to 1% of their Tier 1 capital. Comments are due by 30 September 2022. | Press release
• (30 Jun 2022) Financial Action Task Force targeted update on the implementation of its standards on virtual assets and virtual asset service providers. | Press release

Africa

Central African Republic:        

• (3 Jul 2022) Video from a presentation given at the launch of the Government-backed cryptocurrency initiative, Project Sango. The initiative is intended to promote the Central African Republic as a crypto-hub. Speaking at the event, President Faustin-Archange Touadéra set out his vision for the project, including a common cryptocurrency easily accessible via a smartphone, which would seek to address financial exclusion issues in the country.

Americas

US:  

• (1 Jul 2022) US/UK Financial Innovation Partnership (FIP) joint statement, following its meeting on 29 June 2022. FIP was established in May 2019 to encourage further collaboration and engagement on financial services innovation in both jurisdictions. At the meeting, participants discussed the need to strengthen the governance and regulation of stablecoins, their respective central bank digital currency (CBDC) plans, and the importance of global cooperation on cryptoassets.

APAC

Australia:     

• (23 Jun 2022) Council of Financial Regulators statement following its most recent meeting with key Australian regulators, which focused on issues around de-banking and cryptoassets. Among other things, participants called for the development of a robust regulatory framework to address the potential financial stability issues posed by de-banking and cryptoassets, and discussed the possibility of incorporating payment stablecoins into Australia's future framework for regulating stored value facilities.

Cambodia:  

• (30 Jun 2022) The Securities and Exchange Regulator of Cambodia has announced it is collaborating with crypto-exchange Binance to develop a legal framework for cryptocurrencies in the country. | Press release

India:             

• (30 Jun 2022) Reserve Bank of India financial stability report, which emphasises the risks posed by cryptocurrencies, including their speculative nature and their potential to be used to avoid sanctions and anti-money laundering and counter terrorist financing (AML/CTF) controls. It does, however, note that other factors, including rising commodity prices and geopolitical tensions, currently pose a greater risk to the financial system.

Singapore:   

• (4 Jul 2022) Monetary Authority of Singapore (MAS) response to a Parliamentary question on whether MAS intends to implement further restrictions on cryptocurrency trading platforms. In its response, MAS notes that it is considering further measures, including limits on retail participation and rules on the use of leverage in cryptoasset transactions.
• (30 Jun 2022) MAS information paper, setting out recommendations and examples of good practice following its review of the implementation of the fairness, ethics, accountability and transparency principles, which are intended to guide financial institutions in the responsible use of AI and machine learning.

Thailand:      

• (4 Jul 2022) The Securities and Exchange Commission has announced it has introduced rules which requires digital asset operators to provide clients with training and/or tests to assess their understanding of digital assets before offering their services.  | Press release (in Thai)

Europe

EU:  

• (5 Jul 2022) The EU Parliament has voted to formally adopt the EU Commission's proposal for a Regulation on a Single Market for Digital Services (DSA) and a Regulation on Contestable and Fair markets in the Digital Sector. The two regulations introduce new rules for digital service providers, including provisions designed to protect their customers and to address various anti-competitive behaviours. The final regulations are expected to be published in the Official Journal shortly. | Press release
• (30 Jun 2022) European Systemic Risk Board (ESRB) statement following its meeting held on 23 June 2022. The ESRB notes that it intends to focus its attention on considering the need for additional regulatory measures to address the potential threat posed by cryptoassets to financial stability, making proposals on how to ensure a European and global regulatory standard is developed, identifying the systemic implications of the crypto-market for the EU financial system, including legal recourse considerations, and regularly monitoring financial market exposures to crypto-based products and decentralised finance (DeFi).
• (30 Jun 2022) The EU Council and EU Parliament have reached a provisional agreement on the EU Commission's MiCA proposal. The provisional agreement is subject to approval by the co-legislators before it is formally adopted. | EU Council press release | EU Parliament press release
• (29 Jun 2022) The EU Council and EU Parliament have reached a provisional agreement on the EU Commission's proposal to extend the scope of rules on the information that must accompany transfers of funds so that they also apply to certain cryptoassets. The proposal is part of a package of legislative amendments designed to strengthen the EU's AML/CTF rules. The provisional agreement is subject to approval by the co-legislators before it is formally adopted. | EU Council press release | EU Parliament press release
• (29 Jun 2022) EU Council partial position on another aspect of the EU Commission's proposed AML/CTF package, namely its proposal to create a dedicated AML Authority (AMLA). In its position, the EU Council proposes, among other things, to grant AMLA the authority to directly supervise certain types of credit and financial institutions, including cryptoasset service providers, if they are considered particularly high-risk. The EU Council's position is partial as it has not yet agreed on AMLA's location. | Press release
• (24 Jun 2022) The EU Council has announced it has agreed a mandate for negotiations with the EU Parliament on the EU Commission's proposed Machinery Products Regulation. The proposed regulation is intended to address the health and safety risks posed by the use of machinery, including emerging technologies such as AI. | Press release

Germany:    

• (29 Jun 2022) Speech by Executive Board Member at the Deutsche Bundesbank, Burkhard Balz, on the benefits of CBDCs, particularly those that include input from both central banks and the private sector.

Russia:          

• (28 Jun 2022) Bill on Amendments to Part Two of the Tax Code of the Russian Federation (in Russian), which has been passed by the State Duma. The proposed law exempts the sale of cryptoassets from value-added tax (VAT), and establishes income tax rates of 13% for Russian exchanges on the first RUB 5 million of their taxable base annually, 15% on amounts above that limit, and a flat rate of 15% for foreign exchange operators.

UK:

• (5 Jul 2022) HM Revenue and Customs consultation on the taxation of DeFi activities. In particular, the consultation is seeking views on whether administrative burdens and costs should be reduced for taxpayers engaging in cryptoasset loans and staking.
• (1 Jul 2022) US/UK Financial Innovation Partnership (FIP) joint statement, following its meeting on 29 June 2022. FIP was established in May 2019 to encourage further collaboration and engagement on financial services innovation in both jurisdictions. At the meeting, participant discussed the need to strengthen the governance and regulation of stablecoins, their respective CBDC plans, and the importance of global cooperation on cryptoassets.
• (30 Jun 2022) Speech by the Executive Director of Markets at the Financial Conduct Authority (FCA), Sarah Pritchard, on the current state of the UK financial market. Among other things, Pritchard notes that the FCA, the Bank of England and the Prudential Regulation Authority intend to publish a joint discussion paper on new measures to address the risks posed by the financial sector's reliance on a small number of critical third parties in the cryptoasset sector.
• (29 Jun 2022) FCA update on its CryptoSprint initiative. CryptoSprints are regular events hosted by the FCA, which seek practical solutions to the legal, technical and regulatory challenges currently facing the cryptoasset industry. In May and June 2022, the FCA held two CryptoSprints focusing on issuance and disclosure, regulatory obligations and gaps in the UK's existing custody framework. The update sets out the key findings from the events.

EVENTS

European Perspectives Series: The Digital Services Act – new rules for digital intermediaries (12 July 2022):

The DSA will create new standards for digital services in the EU, regulating illegal content online, the protection of users' rights, and the liability of a wide variety of providers of digital 'intermediary services', including cloud providers, online marketplaces and app stores. The text of the provisional agreement, recently endorsed by the EU Parliament's Internal Market Committee, is expected to be put to a final vote in July before it is formally adopted by the EU Council and published in the EU Official Journal. These regulations are the first major overhaul of EU rules for the online sector for two decades. We are delighted to invite you to join our webinar where tech experts from across the Clifford Chance network will give an overview of the DSA, examine who is affected and how, discuss what happens next, and explain how businesses can prepare. | For more information and to register, please see the event webpage.