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Clifford Chance

Clifford Chance

Fintech

Talking Tech

Global Fintech Update

30 November 2022

Fintech Banking & Finance 30 November 2022

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

Spotlight: MiCA Insights Calls

We have recently held the first in our new series of Insights on Financial Regulation calls in relation to the recently agreed EU Markets in Crypto-assets Regulation (MiCA). MiCA establishes an EU regulatory framework for the issuance of, intermediating and dealing in, cryptoassets and, in the call, some of our European fintech regulatory specialists shared an overview of the framework's new licensing requirements and how transitional arrangements might apply. You can listen to the call recording here. If you are not already registered for access to our Financial Markets Toolkit, please subscribe via the Clifford Chance Client Portal.

Our next call in the series looking at the impact of MiCA for custodians will take place tomorrow on Thursday 29 November at 9:00am GMT / 10:00am CET. If you would like to attend this or upcoming deep dives into the impact of MiCA for issuers of stablecoins and other cryptoassets, or crypto exchanges and brokers, please register here.

GLOBAL LEGAL AND REGULATORY UPDATES, INDUSTRY GUIDANCE AND PUBLICATIONS

International

  • (29 Nov 2022) Bank for International Settlements' Committee on Payments and Market Infrastructures and International Organization of Securities Commissions report presenting the results of an assessment of the state of cyber resilience at 37 financial market infrastructures (FMIs) from 29 jurisdictions as of February 2021. The report finds reasonably high adoption of the Guidance on cyber resilience for financial market infrastructures by FMIs, but also finds one serious issue of concern relating to a small number of FMIs not fully meeting expectations regarding the development of cyber response and recovery plans to meet the two-hour recovery time objective.
  • (24 Nov 2022) Bank for International Settlements paper on central bank digital currencies (CBDCs) in Africa, which is based on a survey of African central banks and analyses the development, motivations and concerns around CBDCs in Africa relative to other emerging and developing regions.
  • (22 Nov 2022) International Monetary Fund blog post which argues that Africa's growing crypto market needs better regulations.

Africa and the Middle East

Israel:            

  • (28 Nov 2022) Report submitted to the Minister of Finance by the Chief Economist at the Ministry of Finance, Shira Greenberg, with recommendations regarding the regulation of digital assets in Israel. The report contains an overview of the digital assets market in Israel and worldwide, in particular the cryptocurrency market, and assesses the risks and the main barriers to the proper development of the market. | Report (in Hebrew) | Press release (in Hebrew)

Zimbabwe:  

  • (16 Nov 2022) Draft Cyber and Data Protection Regulations 2022, which have been released by the Minister of Information and Communications Technologies following consultations with the Postal and Telecommunications Regulatory Authority of Zimbabwe (POTRAZ). The draft includes new provisions regarding the licensing and registration of data controllers and the designation of data protection officers.

Americas

Canada:       

  • (28 Nov 2022) Industry association Paytechs of Canada has rebranded as Fintechs Canada and relaunched to advance a whole-of-government approach to supporting Canada's emerging fintech ecosystem. The not-for-profit association intends to do this by working with policymakers, as well as educating the public and raising awareness of the benefits of Canada's fintech sector. | Press release

US:  

  • (22 Nov 2022) New York Senate Bill 6486, which has been signed by the New York Governor, Kathy Hochul. The bill introduces a two-year ban on all new proof-of-work cryptocurrency mining facilities that use a carbon-based fuel to power their operations.

APAC

Hong Kong:

  • (25 Nov 2022) Hong Kong Monetary Authority (HKMA) circular providing additional guidance to authorised institutions on protection against distributed denial-of-service (DDoS) attacks. Referring to its Supervisory Policy Manuals (SPMs) TM-E-1 on risk management of e-banking and TM-G-1 on general principles for technology risk management, the HKMA reminds authorised institutions to implement adequate controls to safeguard their networks and systems against disruptions.

India:             

  • (29 Nov 2022) The Reserve Bank of India (RBI) has announced that it will launch the first pilot for the retail digital rupee on 1 December 2022. The pilot will cover select locations in closed user groups comprising participating customers and merchants. The digital rupee will be in the form of a digital token that represents legal tender and will be issued in the same denominations that paper currency and coins are currently issued. The pilot will test the robustness of the entire process of digital rupee creation, distribution and retail usage in real time. The RBI has indicated that different features and applications of the token and architecture will be tested in future pilots, based on the lessons from this pilot. | Press release

Republic of Korea:    

  • (21 Nov 2022) The Republic of Korea and Singapore have signed the Korea-Singapore Digital Partnership Agreement (KSDPA), under which the two countries will work together to establish forward looking digital trade rules and norms to promote interoperability between digital systems. The KSDPA will also deepen bilateral cooperation in new emerging areas such as Personal Data Protection, E-payments, Artificial Intelligence and Source Code protection. | Press release

Singapore:   

  • (28 Nov 2022) Reply by Tharman Shanmugaratnam, Senior Minister and Minister in charge of the Monetary Authority of Singapore (MAS), to a Parliamentary Question on the prudential treatment of Singapore banks' cryptoasset exposure. The Minister noted that Singapore-incorporated banks' exposures to cryptoassets are insignificant, contributing less than 0.05% of their total risk weighted assets, but that the MAS requires Singapore-incorporated banks to apply a 1250% risk weight for exposures to 'riskier' cryptoassets such as Bitcoin and Ether, which is the highest risk weight under the Basel Committee's capital framework.
  • (25 Nov 2022) Singapore and the UK have agreed a memorandum of understanding (MoU) on the FinTech Bridge at the 7th UK-Singapore Financial Dialogue. The Fintech Bridge builds on the Regulatory Cooperation Agreement signed in 2016, which enabled the UK and Singaporean fintech sectors to closely align at a regulatory level. The MoU aims to: (i) remove barriers to fintech trade and boost cooperation; (ii) increase the cooperation and sharing of information on emerging trends in the fintech sector; and (iii) deepen engagement between businesses, and regulators. HM Treasury/MAS joint statement | Press release
  • (21 Nov 2022) Singapore and the Republic of Korea have signed the Korea-Singapore Digital Partnership Agreement (KSDPA), under which the two countries will work together to establish forward looking digital trade rules and norms to promote interoperability between digital systems. The KSDPA will also deepen bilateral cooperation in new emerging areas such as Personal Data Protection, E-payments, Artificial Intelligence and Source Code protection. | Press release

Europe

EU:  

  • (29 Nov 2022) Clifford Chance has advised the European Investment Bank (EIB) on the issuance of its first euro-denominated digital bond on a private blockchain. The landmark transaction is the EIB's second euro-denominated digitally native bond issuance and its first under Luxembourg law. The EUR 100 million, two-year bond was issued, recorded and settled using private blockchain-based technology, via Goldman Sachs' tokenisation platform – GS DAPTM. The transaction is also the first syndicated bond issued by a public institution to be admitted to the Luxembourg Stock Exchange’s Securities Official List. | Clifford Chance press release | EIB press release | Banque de France press release | Banque centrale du Luxembourg press release
  • (28 Nov 2022) The EU Council has formally approved the Digital Operational Resilience Act (DORA) and the DORA Amending Directive. This follows the EU Parliament formally adopting the two pieces of legislation on 10 November 2022. The texts still need to be published in the Official Journal, which is expected in December 2022 or January 2023. DORA will come into effect on the twentieth day following the day on which it is published in the Official Journal. It will apply, with direct effect, 24 months from the date on which it enters into force. Therefore, it is expected that DORA will apply to in-scope firms from late 2024 or early 2025 at the latest. | Press release
  • (28 Nov 2022) The EU Council has formally approved the revised Network and Information Security (NIS2) Directive, which is intended to achieve a high common level of cybersecurity in the EU. The NIS2 Directive will set tighter cybersecurity obligations for risk management, reporting obligations and information sharing. The requirements cover incident response, supply chain security, encryption and vulnerability disclosure, among other provisions. The next step will be publication in the Official Journal, which is expected in December 2022 or January 2023. Member States must transpose NIS 2 into national law within 21 months of such publication. | Press release
  • (18 Nov 2022) EU Council progress report on the proposed regulation on horizontal cybersecurity requirements for products with digital elements and amending Regulation (EU) 2019/102 (the Cyber Resilience Act), which sets out the work carried out so far by the Council preparatory bodies and the state of play in the examination of the proposal.
  • (14 Nov 2022) The EU Commission has announced that its Joint Research Centre is setting up a new 'European Centre for Algorithmic Transparency' (ECAT), which is expected to be fully operational in the first quarter of 2023. The ECAT will provide in-house technical assistance in the area of algorithmic systems linked to the Digital Services Act's (DSA's) aim of ensuring a safe, predictable and trusted online environment, drawing from expertise in different disciplines to integrate technical, ethical, economic, legal and environmental perspectives. It will also centralise research with a focus on algorithmic transparency, ensuring that decisions made by algorithms supporting the provision of digital services are transparent, explainable and in line with the risk management obligations of the large online platforms and search engines under the DSA.

Belgium:       

  • (22 Nov 2022) Financial Services and Markets Authority communication on the classification of cryptoassets as a security, investment instrument or financial instrument. Amongst other things, the communication clarifies that, if there is no issuer, as in cases where instruments are created by a computer code and this is not done in execution of an agreement between issuer and investor (for example, Bitcoin or Ether), then in principle the Prospectus Regulation, the Prospectus Law and the MiFID rules of conduct do not apply.

Ukraine:       

  • (28 Nov 2022) The National Bank of Ukraine has presented a draft concept for its CBDC, the digital hryvnia or e-hryvnia. | Statement (in Ukrainian)

UK:

  • (25 Nov 2022) The UK and Singapore have agreed an MoU on the FinTech Bridge at the 7th UK-Singapore Financial Dialogue. The Fintech Bridge builds on the Regulatory Cooperation Agreement signed in 2016, which enabled the UK and Singaporean fintech sectors to closely align at a regulatory level. The MoU aims to: (i) remove barriers to fintech trade and boost cooperation; (ii) increase the cooperation and sharing of information on emerging trends in the fintech sector; and (iii) deepen engagement between businesses, and regulators. HM Treasury/MAS joint statement | Press release
  • (25 Nov 2022) The Information Commissioner's Office and Ofcom have published a joint statement that sets out their views on the interactions between online safety and data protection. The regulators have said that they will work together to provide a clear and coherent regulatory landscape for online services that is proportionate, transparent and outcome-focused, and to regulate in a way that helps online service providers comply with their legal obligations and create safe and trusted online spaces.
  • (23 Nov 2022) The Department for Digital, Culture, Media and Sport has announced the finalisation of the UK's adequacy decision for South Korea, which will enable UK organisations to share personal data securely with the Republic of Korea before the end of 2022. This is the first adequacy decision reached by the UK since leaving the EU and allows UK citizens' personal data to be lawfully transferred to South Korea under the terms of the UK's General Data Protection Regulation.

EVENTS

  • Insights on Financial Regulation: MiCA for custodians (online, 1 December 2022): Clifford Chance is delighted to invite you to a series of Insights on Financial Regulation calls in relation to the recently agreed EU Markets in Crypto-assets Regulation (MiCA). MiCA establishes a broad regulatory framework for cryptoassets in the EU, introducing licensing of cryptoasset service providers and issuers of cryptoassets, including certain stablecoins and clarifying the regulatory obligations applicable to them. In this call we will outline the new requirements that existing and new custodians of digital assets should be aware of, including custody liability requirements and new consumer protection rules. | To register, please see the event series registration form
  • Crypto asset regulation in Europe & the UK - What are the latest updates? (Zurich and online, 5 December 2022): Clifford Chance are delighted to be joining legal experts from the Crypto Valley Association and MLL for a discussion on the latest European and UK regulatory developments in the fast-moving areas of cryptoassets and digital securities. The panel discussion in Zurich at 6pm CET on 5 December will include updates on a range of relevant legislation across the EU, Switzerland and the UK. This is a hybrid event with online attendance also available. For more information and to register, please click here.
  • Insights on Financial Regulation: MiCA for stablecoin issuers (online, 15 December 2022): In this call we will outline the new requirements that potential issuers of cryptoassets and stablecoins should be aware of, including the introduction of licensing for issuers and location, disclosure and governance requirements. | To register, please see the event series registration form
  • Insights on Financial Regulation: MiCA for exchanges, brokers and other venues (online, 5 January 2023): In this call we will outline the new requirements that exchanges and brokers for digital assets should be aware of, including disclosure and governance requirements. | To register, please see the event series registration form