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 PUBLICATIONS AND MATERIALS

• RegTalk blog post – Singapore moves ahead to tighten rules for digital payment token services

SPOTLIGHT 

On 28 June, the European Commission published a proposal for an updated Payment Services Directive (PSD3) and Payment Services Regulation making targeted amendments to the existing EU payments regulatory regime, alongside a new open finance proposal (FIDA). While the majority of the proposed amendments are unlikely to take effect before 2025, some of the changes proposed may have a significant impact on businesses including the requirement for existing payment institutions and e-money institutions to reapply for licences.

In our new briefing we summarise some of the key changes, the potential timeline and what impacted firms can do now to prepare. 

GLOBAL LEGAL AND REGULATORY UPDATES, INDUSTRY GUIDANCE AND PUBLICATIONS

International

• (11 Jul 2023) Bank for International Settlements (BIS) report reviewing the key elements of the crypto ecosystem and assessing their structural flaws. | Webpage
• (11 Jul 2023) BIS Innovation Hub report to the G20 Finance Ministers and Central Bank Governors on lessons learnt on central bank digital currencies (CBDCs). | Webpage
• (10 Jul 2023) BIS paper summarising the results of the 2022 BIS survey on CBDCs and crypto. The responses from 86 central banks show that the proportion engaged in some form of CBDC work has risen to 93% and that the work on retail CBDC is more advanced than on wholesale CBDC. The paper also states that most central banks see potential value in having both a retail CBDC and a fast payment system, and that there could be 15 retail and nine wholesale CBDCs publicly circulating by 2030. | Webpage
• (7 Jul 2023) BIS Project Polaris Part 2, which sets out a security and resilience framework for CBDC systems to help central banks mitigate the potential risks attendant to a CBDC, and Part 3 on closing the CBDC cyber threat modelling gaps, which warns that there are gaps in existing threat modelling techniques that may not adequately address the threats and associated security controls to properly protect CBDCs that make use of novel technology from the tactics, techniques and procedures used by threat actors in the decentralised finance (DeFi) space. | Webpages: Project Polaris Part 2 and Part 3

Africa

Namibia:

• (6 Jul 2023) Virtual Assets Bill (B12-2023), which has been approved by the National Assembly and provides for the licensing and regulation of virtual asset service providers and designates a regulatory authority to regulate and supervise virtual asset service providers and related activities. | Webpage

Americas

Canada:       

• (6 Jul 2023) Canadian Securities Administrators (CSA) guidance on cryptoasset investment funds that are reporting issuers, which outlines CSA staff’s views and expectations regarding the operations of investment funds that seek to invest in cryptoassets, either directly or indirectly, within the framework of National Instrument 81-102 Investment Funds.

US:  

• (11 Jul 2023) Letter from the US Senate Committee on Finance to members of the digital asset community and other interested parties with a series of questions intended to help the Committee better understand how Congress can address the tax challenges and opportunities presented by digital assets.
• (6 Jul 2023) Report by members of the US financial services sector on the findings of a proof of concept (PoC) that explored the feasibility of the regulated liability network (RLN), which is envisioned as an interoperable network for wholesale payments operating on a shared multi-entity distributed ledger. | Press release

APAC

South Korea:

•  (11 Jul 2023) Financial Services Commission (FSC) exposure draft (in Korean) of Corporate Accounting Standards No. 1001, 'Indication of Financial Statements', which would require companies that own or issue virtual assets to disclose their holdings in financial statements from 2024 onwards.

Europe

EU:  

• (12 Jul 2023) European Securities and Markets Authority (ESMA) consultation on the first package of technical standards under the Markets in Cryptoassets Regulation (MiCA). In this first of three consultation packages, ESMA is seeking input on proposed rules for cryptoasset service providers (CASPs), relating to their authorisation, identification and management of conflicts of interests and also how CASPs should address complaints. Comments are due by 20 September 2023. ESMA expects to publish its final report and submit the draft technical standards to the EU Commission for endorsement by 30 June 2024 at the latest. ESMA's second MiCA consultation package is scheduled for October 2023. | Press release
• (12 Jul 2023) European Banking Authority (EBA) consultation on two sets of draft regulatory technical standards (RTS) and one set of implementing technical standards (ITS) relating to the authorisation as issuer of asset-referenced tokens (ARTs) and the assessment of acquisition of qualifying holdings in issuers of ARTs under MiCA. Deadline for comments: 12 October 2023. | Press release
• (12 Jul 2023) EBA consultation on draft RTS on complaints handling procedures for issuers of ARTs under MiCA. Deadline for comments: 12 October 2023. | Press release
• (12 Jul 2023) EBA statement for the attention of financial institutions and other undertakings who intend to commence, or have commenced, ART or electronic money token (EMT) activities prior to 30 June 2024 (the application date for the relevant provisions of MiCA) and for competent authorities. The statement is intended to encourage timely preparatory actions for the application of MiCA. | Press release
• (11 Jul 2023) EU Commission communication setting out its strategy on Web 4.0 and virtual worlds to steer the next technological transition. The Commission has emphasised that Web 4.0 should be driven by open technologies and standards that ensure interoperability between platforms and networks, and freedom of choice for users. | Press release | Q&A
• (11 Jul 2023) European Insurance and Occupational Pensions Authority (EIOPA) paper on methodological principles of insurance stress testing of cyber risks. | Press release
• (10 Jul 2023) The EU Commission has adopted its adequacy decision for the EU-US Data Privacy Framework. The decision concludes that the United States ensures an adequate level of protection for personal data transferred from the EU to US companies under the new framework. On the basis of the adequacy decision, personal data can flow from the EU to US companies participating in the framework without the need to put in place additional data protection safeguards. | Press release | Q&A
• (6 July 2023) Association for Financial Markets in Europe (AFME) white paper on DeFi and principles for building a robust digital economy, which argues that DeFi and its associated activities must be brought within the regulatory perimeter in an appropriate way to manage risks to market integrity, financial stability, and end users, while still promoting financial and technological innovation | Summary

Germany:    

• (5 July 2023) Speech by Burkhard Balz, Member of the Executive Board of the Deutsche Bundesbank, on the digital euro and how central bank digital currency (CBDC) can shape tomorrow's payments landscape. | Webpage

Italy:              

• (10 Jul 2023) Commissione Nazionale per le Società e la Borsa (Consob) consultation (in Italian) on a proposed set of second-level rules intended to implement the Fintech Decree (Decree Law no. 25 of 17 March 2023, converted, with amendments, by Law no. 52 of 10 May 2023), which introduced a new form and circulation regime for certain financial instruments, recognising the possibility of using distributed ledger technologies (DLTs) for their issuance and transfer. In particular, the draft regulation establishes the register of ledger operators, describes the application process, and outlines the content of the information document on the underlying DLT infrastructure that ledger operators are required to make available to prospective investors. Consob has indicated that it welcomes observations not only on the subject matter of this particular regulation, but also in relation to any other areas of the Fintech Decree which might become the subject of additional second-level measures at a later stage. Deadline for comments: 9 August 2023. | Press release (in Italian)

UK:

• (12 Jul 2023) Financial Conduct Authority (FCA) feedback statement (FS23/4) summarising the responses to its October 2022 discussion paper (DP 22/5) on the potential competition impacts of big tech entry and expansion in retail financial services – in particular, payments, deposits, consumer credit and insurance – and setting out the FCA's next steps. At this stage the FCA is not proposing any regulatory or policy changes.
• (11 Jul 2023) HM Treasury consultation on the Digital Securities Sandbox (DSS), which is intended to enable digital securities to be tested and ultimately adopted across financial markets. The consultation sets out the Treasury’s proposed approach to delivering the DSS, which will be the first financial market infrastructure sandbox delivered under the powers granted as part of the Financial Services and Markets Act 2023. Deadline for comments: 22 Aug 2023 | Webpage
• (11 Jul 2023) Digitisation Taskforce interim report setting out a number of potential recommendations to support the modernisation of the UK's shareholding framework and questions for industry to consider. Sir Douglas Flint, who chairs the Taskforce, will be conducting a period of open engagement over the next six months, ahead of delivering the final report to the Government. Feedback on the interim report is due by 25 Sep 2023. | Webpage
• (11 Jul 2023) The independent Future of Payments Review, which is being chaired by Joe Garner, has been launched to report on how payments are likely to be made in the future and the steps needed to successfully deliver world leading retail payments. The Review's terms of reference and a call for input to inform the Review have been published. The call for input closes on 1 Sep 2023. | Webpage
• (11 Jul 2023) FCA press release on its continuing crackdown on unregistered crypto ATMs in the UK
• (6 Jul 2023) UK Finance report on securities tokenisation, which argues that tokenisation of securities could improve the financial system’s operational efficiencies and sets out the key areas that the UK needs to focus on to become a leader in securities tokenisation. | Webpage | Briefing note | Press release
• (5 July 2023) Association of Corporate Treasurers (ACT) guide to opening a crypto wallet, which has been developed to provide treasurers with a series of questions that will help them identify what type of wallet they need and some of the tax, accounting, and operational aspects that will require consideration. | Webpage