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Global Fintech Update

10 February 2023

Banking & Finance Crypto Fintech 10 February 2023

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

Last week HM Treasury launched a consultation on a proposed new comprehensive regulatory regime for firms engaging in certain cryptoasset activities in the UK. This latest consultation builds on a previous proposal to introduce a regime that would regulate fiat-backed stablecoins used for payments (or Digital Settlement Assets) and would also introduce a crypto market abuse regime. 

In parallel, HM Treasury has also issued a response to its consultation on a proposal to introduce financial promotions rules relating to cryptoassets, meaning that financial promotions relating to cryptoassets would need to be approved by an authorised person unless an exemption applies. Due to industry feedback, a temporary exemption has been proposed which would enable cryptoasset businesses that have registered with the FCA under the Money Laundering, Terrorist Financing and Transfer of Funds Regulations to make their own financial promotions.

You can read our highlights of the proposals, including a high-level comparison with the EU's Markets in Cryptoassets Regulation (MiCA) on our Financial Markets Toolkit

CLIFFORD CHANCE BRIEFINGS AND MATERIALS

GLOBAL LEGAL AND REGULATORY UPDATES, INDUSTRY GUIDANCE AND PUBLICATIONS

International

  • (7 Feb 2023) The Bank for International Settlements (BIS) Innovation Hub has announced that, in 2023, it will increase its focus on improving payments systems and experimenting with central bank digital currencies (CBDCs); on shaping the future of financial regulation and supervision; and on greening and securing the financial sector. Its 2023 work programme also includes Project Pyxtrial, a new experiment being launched by the Hub's London Centre to enable systemic monitoring of stablecoins. | BIS Innovation Hub webpage

Americas

US:  

  • (7 Feb 2023) The Securities and Exchange Commission's Division of Examinations has announced its 2023 examination priorities, which include emerging technologies and cryptoassets. The Division will conduct examinations of broker-dealers and registered investment advisers that are using emerging financial technologies or employing new practices, including technological and online solutions to meet the demands of compliance and marketing and to service investor accounts. Examinations of registrants will focus on the offer, sale, recommendation of, or advice regarding trading in crypto or crypto-related assets and include whether (i) the firms met and followed their respective standards of care when making recommendations, referrals, or providing investment advice; and (ii) routinely reviewed, updated, and enhanced their compliance, disclosure, and risk management practices. | Press release
  • (3 Feb 2023) Speech by Commodity Futures Trading Commission (CFTC) Chairman, Rostin Behnam, in which he reiterated his belief that there remains a gap in crypto cash market regulation for non-security tokens, and that the CFTC is well positioned to fill this specific gap if Congress so chooses. Behnam warned that regulation is necessary to protect customers and to prevent failures which cannot predictably be contained within any boundaries across the domestic and global financial market, and said he would continue to engage with the new Congress and provide technical assistance to draft legislation, as requested.
  • (1 Feb 2023) Financial Accounting Standards Board (FASB) tentative decision to clarify that the scope of its project on Accounting for and Disclosure of Crypto Assets (formerly known as Accounting for and Disclosure of Digital Assets) would exclude cryptoassets created or issued by the reporting entity or their related parties. The Board also observed that the scope criteria would exclude assets commonly referred to as 'wrapped tokens' and that the Board's basis for conclusions should clearly emphasise that point. The Board decided not to modify the scope criteria to specify that the distributed ledger or blockchain must be public. The Board has directed staff to draft a proposed Accounting Standards Update for vote by written ballot and decided to expose the proposed update for public comment for 75 days.

APAC

Australia:     

  • (3 Feb 2023) Australian Government consultation seeking feedback on a token mapping framework, which is a foundational step in the Government's multi-stage reform agenda to develop appropriate regulatory settings for the crypto sector. Token mapping is intended to build a shared understanding of cryptoassets in the Australian financial services regulatory context. The Government plans to release a further consultation paper proposing a licensing and custody framework for cryptoasset service providers in mid-2023 to allow for sufficient consultation prior to the introduction of legislation. | Consultation deadline: 3 March 2023

Singapore:   

  • (1 Feb 2023) The Republic of Singapore and the European Union have signed the EU-Singapore Digital Partnership (EUSDP). The EUSDP is an overarching framework for all areas of bilateral digital cooperation between the EU and Singapore, which include: (i) core issues in the cross-border digital economy such as digital trade facilitation, trusted data flows, electronic payments, and standards and conformance; and (ii) new and emerging areas such as artificial intelligence, digital identities, and 5G/6G. | Press release

South Korea:

  • (6 Feb 2023) Financial Services Commission (FSC) press release (in Korean) on measures to improve the regulation of security token issuance and distribution and to allow security token offerings under the Capital Markets Act. The FSC has set out principles and examples for determining whether digital assets are securities and sought to improve regulatory systems to ensure proper issuance and distribution of security tokens.

Europe

EU:  

  • (7 Feb 2023) Speech by the Chairperson of the European Banking Authority (EBA), José Manuel Campa, on embedding responsible innovation in financial institutions' culture, conduct and communication. Campa also set out some of the work the EBA expects to carry out in 2023.
  • (6 Feb 2023) The European Supervisory Authorities (ESAs) have held a joint public event in the format of a technical discussion about the Digital Operational Resilience Act (DORA). The online event gathered over 2,000 representatives from credit and payment institutions, investment firms, (re)insurance undertakings, ICT third-party service providers and other financial entities. The event allowed industry participants to engage with regulators on the new legislation, share their initial views and raise any potential areas of concern regarding the policy mandates the ESAs have to develop over the course of 2023 and 2024. | Press release | Event webpage | Programme | European Commission presentation slides | ESA presentation slides
  • (3 Feb 2023) European Securities and Markets Authority (ESMA) updated Q&A on the implementation of Regulation (EU) 2022/858 on a pilot regime for market infrastructures based on distributed ledger technology (DLT).
  • (1 Feb 2023) The European Union and the Republic of Singapore have signed the EU-Singapore Digital Partnership. The EUSDP is an overarching framework for all areas of bilateral digital cooperation between the EU and Singapore, which include: (i) core issues in the cross-border digital economy such as digital trade facilitation, trusted data flows, electronic payments, and standards and conformance; and (ii) new and emerging areas such as artificial intelligence, digital identities, and 5G/6G. | Press release
  • (1 Feb 2023) European Securities and Markets Authority Report on Trends, Risks and Vulnerabilities Risk Analysis: Artificial intelligence in EU securities markets, which provides an overview of artificial intelligence (AI) use cases across securities markets in the EU and assesses the degree of adoption of AI-based tools.

Belgium:       

  • (7 Feb 2023) The Belgian Federal Government has announced stricter rules on advertising for virtual currencies to allow consumers to be better informed of the risks and better protected against dishonest suppliers. Under the new rules, any advertising for virtual currencies will have to include a clear general disclaimer warning consumers of the risks involved. In cases where celebrities appear in advertisements, it must be clearly indicated if they are receiving remuneration for doing so. The Financial Services and Markets Authority will also be tasked with ensuring that advertising for virtual currencies is not misleading or inaccurate. | Press release (in French)

Italy:

  • (4 Feb 2023) Speech by Ignazio Visco, Governor of the Bank of Italy, in which he discussed, amongst other things, the Bank of Italy's work on crypto, including on developing technological solutions and defining a comprehensive framework of standards at European and global level to facilitate the safe use of DLTs and its applications. He also noted that the Italian financial regulators have begun the processes for the authorisation and supervision activities envisaged in the Markets in Cryptoassets Regulation (MiCA) and the pilot regulation for market infrastructures based on DLT.

UK:

  • (7 Feb 2023) HM Treasury/Bank of England (BoE) consultation paper on the case for a retail CBDC or 'digital pound'. The digital pound would be a new form of sterling, similar to a digital banknote, issued by the BoE. At this stage, the Government and BoE judge it likely that the digital pound will be needed in the future. Although they believe it is too early to decide whether to introduce the digital pound, they have decided that preparatory work is justified and are seeking views on the proposed model of the digital pound set out in the consultation paper. | Consultation deadline: 7 June 2023.| Press release | BoE Explainer – what is the digital pound? | The digital pound: Technology Working Paper
  • (7 Feb 2023) Speech by BoE Deputy Governor, Sir Jon Cunliffe, in which he discusses why it is likely that a retail, general purpose digital pound will be needed by the end of this decade, what the model could look like and how the digital pound may sit within the digital payments landscape.
  • (6 Feb 2023) Department for Digital, Culture, Media & Sport (DCMS) call for views on software resilience and security for businesses and organisations, which is intended to improve the Government's understanding of how to address software risks and help create a more resilient digital environment. | Deadline for comments: 1 May 2023
  • (6 Feb 2023) Financial Conduct Authority (FCA) statement calling on all cryptoasset firms marketing to UK consumers, including firms based overseas, to start preparing for the new UK financial promotions regime and warning that it will take robust action against firms breaching these requirements.
  • (6 Feb 2023) The FCA has set up a new Innovation Advisory Group (IAG), which has been tasked with providing early input into planned initiatives, bringing key issues or concerns impacting the fintech and regtech sectors to the FCA's attention, and identifying opportunities for continued innovation in financial services, and collaboration between the industry and the regulator. The IAG is due to convene for the first time in February 2023 and will meet at regular intervals throughout the year. | Press release
  • (3 Feb 2023) HM Treasury webpage for the G7 Cyber Expert Group's Fundamental Elements publication series. The collection includes Fundamental Elements documents produced by the G7 Cyber Expert Group since 2016 and sets out policy papers, including on: 

Middle East

Dubai:

  • (7 Feb 2023) Virtual Assets Regulatory Authority (VARA) Virtual Assets and Related Activities Regulations 2023, which set out a regulatory framework for virtual asset service providers (VASPs). VASPs that fulfil VARA's licensing requirements will be required to comply with four compulsory rulebooks (Company, Compliance & Risk Management, Technology & Information, and Market Conduct). In addition, seven activity-specific rulebooks have been developed to cater for risks associated with the provision of particular virtual asset activities (Advisory, Broker-Dealer, Custody, Exchange, Lending & Borrowing, Payments & Remittances, and Management & Investment).

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