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Global Fintech Update

07 December 2022

Fintech Crypto Banking & Finance 7 December 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

Crypto Development in the US

Clifford Chance partner Steven Gatti recently spoke to Sophia Bantanidis in the Citi Global Insights team on the US regulatory environment for cryptoassets. Steve shared an overview of regulatory developments at both State and Federal levels and some of the more significant bills that are currently under consideration, as well as outlining the current regulation by enforcement approach. Watch the video.

GLOBAL LEGAL AND REGULATORY UPDATES, INDUSTRY GUIDANCE AND PUBLICATIONS

International

  • (6 Dec 2022) The Financial Stability Board (FSB) Plenary has met in Basel to discuss the outlook for global financial stability. The Plenary discussed developments in cryptoasset markets, including preliminary lessons from the recent failure of FTX. The FSB has also indicated that it will enhance its cryptoassets monitoring framework to include decentralised finance (DeFi)-specific vulnerability indicators and explore approaches to fill data gaps to measure and monitor interconnectedness of DeFi with traditional finance, with the real economy and with the crypto-asset ecosystem. | Press release
  • (2 Dec 2022) Organisation for Economic Cooperation and Development (OECD) paper on the environmental impact of digital assets and cryptoasset mining and distributed ledger technology consensus mechanisms. The paper explores the growing environmental impact of cryptoassets due to increasing institutional and retail investors participation in these markets.
  • (1 Dec 2022) The Wolfsberg Group has published the Wolfsberg Principles for Using Artificial Intelligence and Machine Learning in Financial Crime Compliance, which identify five elements that support an ethical and responsible use of AI/ML: (i) legitimate purpose; (ii) proportionate use; design and technical expertise; (iii) accountability and oversight; (iv) openness and (v) transparency. | Press release

Americas

US:  

  • (1 Dec 2022) Statement by Commodity Futures Trading Commission (CFTC) Commissioner Kristin N. Johnson, in which she called for the CFTC to use its existing authority to further mitigate the potential risks of crypto fraud to all customer assets held by all current registrants or licensed participants operating in its markets, as well as prospective registrants. Johnson also expressed her hope that Congress will identify a whole-of-government approach to ensuring that regulators prevent schemes that rely on regulatory arbitrage or take advantage of the regulatory gap that currently limits their visibility into digital asset trading markets and stymies their ability to adopt rules necessary to effectuate their mission in these markets, i.e. to protect customers, ensure market integrity, and foster fair, orderly, and transparent markets.
  • (1 Dec 2022) The New York Department of Financial Services (NYDFS) has published a proposed regulation on virtual currency licensee assessments, which sets out the basis for allocating the NYDFS' costs and expenses among virtual currency business licensees, and the process for making such assessments.
  • (30 Nov 2022) Depository Trust & Clearing Corporation whitepaper exploring post-trade security settlement with a US central bank digital currency (CBDC). The paper outlines key findings from the pilot (formerly known as Project Lithium), the first private sector initiative to explore how tokenised securities and a wholesale CBDC could operate within the US settlement infrastructure leveraging distributed ledger technology. | Press release

APAC

Indonesia:    

  • (30 Nov 2022) Speech of the Governor of Bank Indonesia, Perry Warjiyo, at the Bank Indonesia Annual Meeting, in which he discussed the work being done on the development of the Digital Rupiah as a CBDC.

Europe

EU:

  • (6 Dec 2022) The EU Council has adopted its common position (general approach) on the Artificial Intelligence Act. The Act is intended to ensure that artificial intelligence (AI) systems placed on the EU market and used in the EU are safe and respect existing law on fundamental rights and values. The adoption of the general approach will allow the Council to enter trilogue negotiations with the EU Parliament once the latter adopts its own position with a view to reaching an agreement on the proposed regulation. | Press release
  • (30 Nov 2022) European Central Bank blog post on Bitcoin's "last stand" amid the widespread fallout in crypto markets following the collapse of FTX, which argues that Bitcoin appears to be neither suitable as a payment system nor as a form of investment, should be treated as neither in regulatory terms, and thus should not be legitimised.
  • (29 Nov 2022) EU Parliament briefing on the Markets in Cryptoassets Regulation (MiCA), which 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. The briefing provides an overview of MiCA, the changes it will bring, and the agreement resulting from the negotiations between the Parliament and the EU Council. The EU Parliament is expected formally to adopt MiCA at a plenary session during the week commencing 13 February 2023.

Malta:          

  • (5 Dec 2022) Malta Financial Services Authority consultation document on the proposed treatment of non-fungible tokens in the context of the virtual financial assets framework. Consultation deadline: 6 January 2023.

UK:

  • (1 Dec 2022) Speech by the Economic Secretary, Andrew Griffith MP, in which he reiterated the UK Government's commitment to fintech and crypto and the potential of the underlying technology, and acknowledged that recent events in the crypto market reinforce the case for timely, clear and effective regulation.
  • (30 Nov 2022) Financial Conduct Authority webinar on the competition impacts of Big Tech in retail financial services. The panel included Daniel Schwarz, Clifford Chance Senior Associate and Legal Fellow at Cambridge University’s Centre for Finance, Technology & Regulation.

EVENTS 

Insights on Financial Regulation: MiCA for stablecoin issuers (online, 15 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 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

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