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.

SPOTLIGHT

Tech Trends 2023

Our 2023 tech predictions video series kicked off last week with lawyers from across Clifford Chance sharing their bold predictions on AI, cryptocurrencies, digital assets disputes, the focus of antitrust agencies, the evolution of the metaverse, tech sovereignty, stablecoins and more hot topics.

You can find the first videos on our website, with more being added over the next week.

CLIFFORD CHANCE BRIEFINGS AND MATERIALS

• (10 Feb 2023) Talking Tech – Biden targets "Big Tech" in 2023 State of the Union - will it stick this time?
• (8 Feb 2023) Clifford Chance briefing – Tech Trends 2023: Generative AI, cyber wars, net zero tech, the industrial metaverse and more...
• (7 Feb 2023) Talking Tech – Opportunities in a downturn: The private M&A play for distressed tech companies in the US

GLOBAL LEGAL AND REGULATORY UPDATES, INDUSTRY GUIDANCE AND PUBLICATIONS

International

• (8 Feb 2023) Speech by Bank for International Settlements General Manager, Agustín Carstens, on big techs in finance. Carstens warned that, as big techs continue to push into financial services on the back of their data-driven business model, the current regulatory approach is not fully fit for purpose to address related policy challenges. He argued that a regulatory re-think is warranted, and that it is high time to consider tangible options for action.

Americas

El Salvador:

• (10 Feb 2023) International Monetary Fund (IMF) statement on its official staff visit to San Salvador, in which it calls for greater transparency over the Government's transactions in Bitcoin and the financial situation of the state-owned Bitcoin-wallet (Chivo), especially to assess the underlying fiscal contingencies and counterparty risks.

US:  

• (10 Feb 2023) Speech by Board of Governors of the Federal Reserve System member, Christopher J Waller, on the crypto ecosystem. Waller argued that, while it is critical that regulators ensure the financial stability risks associated with cryptoassets are mitigated, it is important that they keep the various parts of the crypto ecosystem distinct in their minds as the debate about if and how to regulate crypto rolls on, adding that doing so will ensure regulators do not unduly limit the development and potential future uses of the positive features of the crypto ecosystem.
• (8 Feb 2023) US Department of the Treasury report on the potential benefits and challenges associated with the increasing trend of financial sector firms adopting cloud services technology. The report finds that cloud services can increase access and reliability for local communities and empower community banks to compete with financial technology firms, but that financial service firms ramping up their reliance on cloud-based technologies need more visibility, staff support, and cybersecurity incident response engagement from cloud service providers. The report also recommends further evaluation from Treasury and the broader financial regulatory community to continue to determine the financial risks associated with a limited number of providers offering cloud services.| Press release
• (8 Feb 2023) Federal Reserve Bank of New York staff report on the Bitcoin–Macro Disconnect, which investigates the link between Bitcoin and macroeconomic fundamentals by estimating the impact of macroeconomic news on Bitcoin using an event study with intraday data. The key result is that, unlike other US asset classes, Bitcoin is orthogonal to monetary and macroeconomic news. The authors note that this disconnect is puzzling as unexpected changes in discount rates should, in principle, affect the price of Bitcoin even when interpreting Bitcoin as a purely speculative asset.
• (8 Feb 2023) Speech by Commodity Futures Trading Commission (CFTC) Commissioner Kristin Johnson on pathways for protecting customers in investors in cryptoasset funds and preserving market integrity in light of the crypto crises that began in 2022. Johnson argued that the CFTC should undertake a substantive and comparative review of the regulatory protections afforded to customer funds, the investment of funds, and the duties of those that guide investments servicing customers in the crypto derivatives market. She added that it is worth considering a heightened duty for commodity trading advisers and commodity pool operators who offer crypto investing advice and repeated her call for a provision in crypto legislation that would extend the application of reparations jurisdiction to protect crypto commodity derivatives customers.

APAC

Malaysia:     

• (9 Feb 2023) Speech by Deputy Governor of the Central Bank of Malaysia, Abdul Rasheed Ghaffour, on embracing the digital revolution and harnessing benefits of digitalisation for future growth.

Europe

EU:  

• (15 Feb 2023) European Central Bank (ECB) supervision newsletter on the recently finalised Basel Committee on Banking Supervision (BCBS) standard on the prudential treatment of banks’ cryptoasset exposures. In the newsletter, the ECB states that although the BCBS standard is not yet legally binding pending its transposition in the European Union, banks wishing to engage in this market are expected to comply with the standard and take it into account in their business and capital planning.
• (14 Feb 2023) The EU Commission has launched the European blockchain regulatory sandbox for distributed ledger technologies. The aim of the project, which is running from 2023 to 2026, is to provide a framework for regulators, supervising authorities and blockchain innovators to engage in regulatory dialogue, identify obstacles from a legal and regulatory perspective in a safe and confidential environment, and thus increase legal certainty for innovative decentralised technology solutions, including blockchain. | Press release | News article | FAQs | Application forms and other key documents
• (14 Feb 2023) European Systemic Risk Board report on advancing macroprudential tools for cyber resilience, which warns that there is an increased risk of cyber attacks on the EU financial system by states or state-sponsored actors and encourages authorities across the EU to make progress on three elements: (i) cyber resilience scenario testing, (ii) systemic impact tolerance objectives, and (iii) financial crisis management tools. | Press release
• (14 Feb 2023) Securities and Markets Stakeholder Group advice to the European Securities and Markets Authority on potential practical challenges regarding the implementation of the Digital Operational Resilience Act (DORA).
• (10 Feb 2023) The EU Parliament's Committee on Economic and Monetary Affairs (ECON) has published the reports it adopted in January on changes to the Capital Requirements Regulation (CRR3) and the Capital Requirements Directive (CRD6), which are intended to complete the EU's implementation of Basel III.  Amongst other things, the Committee members want banks to disclose their exposure to cryptoassets and cryptoassets services and to provide a specific description of their risk management policies related to cryptoassets. The changes still need to be approved by the Parliament's plenary and the EU Council before they can enter into force. The ECON Committee has also called on the EU Commission to submit a legislative proposal on a dedicated prudential treatment for exposures to cryptoassets by June 2023. | Report on CRR3 | Report on CRD6

France:          

• (9 Feb 2023) Speech by Governor of the Bank of France, François Villeroy de Galhau, on big techs in finance and the challenges they pose in relation to competition, data protection and cybersecurity.

UK:

• (15 Feb 2023) UK Jurisdiction Taskforce (UKJT) legal statement on the issuance and transfer of digital securities under English private law, which considers whether equity, debt or other securities can be validly issued and transferred under English law using blockchain systems. The statement follows the UKJT's August 2022 consultation and concludes that English law can accommodate digital bonds circulated on a public blockchain without custodians, and the on-chain transfer of digital equity securities, even if a fully decentralised blockchain cannot currently be used as a register of members.
• (9 Feb 2023) Financial Conduct Authority (FCA) feedback statement (FS23/1) on its March 2022 call for input on the use of synthetic data in financial services. The FCA was seeking to understand the extent to which synthetic data, i.e. statistically realistic but 'artificial' data, could meet the increasing demand for large volumes of high-quality data to help develop and train innovative models and systems in the financial services sector. Based on the feedback to the call for input and previous research, the FCA's current position is that synthetic data can potentially make a significant contribution to beneficial innovation in UK financial markets, although it believes that further research (specifically use case identification and understanding its utility as a regulatory tool) is required before the benefits of this technology can be fully realised. | Webpage

Middle East

UAE:

• (12 Feb 2023) The Central Bank of the UAE has launched its Financial Infrastructure Transformation Programme to accelerate the digital transformation of the financial services sector. The first stage of the programme includes a series of digital payment infrastructures and services such as the launch of a card domestic scheme, an instant payments platform, and the issuance of a central bank digital currency for cross-border and domestic uses. | Press release