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

Guide to arbitration of disputes relating to cryptoassets and smart contracts

Arbitration has many features that make it well suited to disputes relating to cryptoassets and smart contracts and it is fast becoming the dispute resolution option of choice in the crypto sector. The inherent flexibility of arbitration and party autonomy can help to address many of the unique technical challenges arising from cryptoassets. However, technology, unique procedural options and public policy issues also give rise to specific concerns when arbitration is used.

As a guide to these issues, we have published an article, 'Arbitration of cryptoasset and smart contract disputes: arbitration unchained?'

GLOBAL LEGAL AND REGULATORY UPDATES, INDUSTRY GUIDANCE AND PUBLICATIONS

International

• (10 Aug 2023) Institute of International Finance (IIF) briefing note summarising the July IIF Digital Asset Forum, which focused on visions for future digital financial infrastructure. Participants emphasised the importance of a collective approach to building, operating and governing financial infrastructure, particularly through public-private collaboration, and that the robustness of any future infrastructure was non-negotiable. The forum was conducted under the Chatham House Rule and does not represent the official position of the IIF or its membership.

Americas

Canada:       

• (10 Aug 2023) Bank of Canada staff discussion paper on ‘Unmet Payment Needs and a Central Bank Digital Currency’, which argues that most Canadian consumers face few payment gaps or frictions and therefore might have relatively weak incentives to adopt and to use central bank digital currency (CBDC) at scale.

US:  

• (14 Aug 2023) Federal Deposit Insurance Corporation (FDIC) Risk Review 2023, which includes a new section on cryptoasset risk noting that cryptoassets present novel and complex risks to banks that are difficult to assess fully.
• (9 Aug 2023) Securities and Exchange Commission (SEC) court filing in its action against Ripple Labs, Inc., setting out the basis for a motion for leave to file an interlocutory appeal against those parts of the 13 Jul 2023 Order by the United States District Court in the Southern District of New York granting summary judgment in Ripple’s favour (in which the Court concluded that Ripple’s programmatic sales of its XRP token on digital asset exchanges did not constitute the offer and sale of investment contracts).

APAC

India:             

• (10 Aug 2023) Reserve Bank of India (RBI) statement on various regulatory policy measures and developments, including (i) the proposed launch of a novel payment mode known as ‘Conversational Payments’ on the Unified Payments Interface (UPI), which will enable users to engage in a conversation with an artificial intelligence (AI)-powered system to initiate and complete transactions, and (ii) the development of a digital Public Tech Platform to enable frictionless digital credit delivery by facilitating the seamless flow of required digital information to lenders. According to the RBI, this end-to-end digital platform will have an open architecture, open Application Programming Interfaces (APIs) and standards, to which all financial sector players can connect seamlessly in a ‘plug and play’ model.

Singapore:

• (15 Aug 2023) Monetary Authority of Singapore (MAS) response to its October 2022 public consultation on the proposed regulatory approach for stablecoin-related activities, which includes the MAS responses to the feedback it received and sets out its finalised regulatory approach towards stablecoins in Singapore. The MAS’ stablecoin regulatory framework will apply to single-currency stablecoins (SCS) pegged to the Singapore Dollar or any G10 currency, that are issued in Singapore. | Press release

Europe

EU:

• (15 Aug 2023) The European Central Bank (ECB) has published the outcome of the second meeting of the Eurosystem’s market contact group on new technologies for wholesale central bank money settlement. The group supports the Eurosystem in setting up experiments and trials for market participants to explore solutions for settling wholesale financial transactions recorded on distributed ledger technology (DLT) platforms in central bank money. | Presentation slides | Press release

France:          

• (10 Aug 2023) The Autorité des marchés financiers (AMF) has announced that it is amending the provisions of its General Regulation and its policy on the regime for digital asset service providers (DASPs) to: incorporate the provisions applicable to DASPs subject to ‘enhanced’ registration introduced by the DDADUE Law. This regime will become mandatory from 1 January 2024 for new players wishing to provide the four services subject to mandatory registration; and align the requirements for DASP licences with those for European authorisation for cryptoasset service providers (CASPs) under the Markets in Cryptoassets Regulation (MiCA), and allow a fast track procedure to be implemented for CASP authorisation.

Germany:    

• (12 Jul 2023) Federal Financial Supervisory Authority (BaFin) article on the risks involved when banks use AI, machine learning (ML), and algorithmic decision-making processes for granting loans.

Russia:          

• (9 Aug 2023) Central Bank of Russia press release (in Russian) announcing the launch of pilot testing operations with real digital rubles involving 13 banks and a limited circle of their clients from 15 Aug 2023.

UK:

• (14 Aug 2023) Association of Corporate Treasurers (ACT) article on accounting considerations for cryptocurrencies (IFRS).
• (11 Aug 2023) Financial Conduct Authority (FCA) response to a freedom of information request relating to the registration of cryptoasset businesses in order to be to be compliant with the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017. In its response, the FCA confirms that: (i) 291 applications for registration have been received from cryptoasset businesses under the 5th Anti-Money Laundering Directive since 10 January 2020, (ii) 38 firms have been registered, (iii) the FCA has refused 5 and rejected 22 applications, and (iv) 155 firms have withdrawn their applications.
• (10 Aug 2023) The FCA’s June 2023 guidance consultation (GC23/1) on how it will approach, and how firms comply with, the requirement that cryptoasset financial promotions must be fair, clear and not misleading has now ended. Responses published to date include those from: Bitcoin Policy UK | Crypto UK | Digital Currencies Governance Group | Innovate Finance | The Payments Association
• (9 Aug 2023) The Bank of England and HM Treasury have issued an open call for interest, for academics and researchers wishing to join a newly created CBDC Academic Advisory Group (the AAG). The AAG will bring together experts from a range of disciplines related to our work on the digital pound, including monetary policy, finance, competition economics, industrial organisation, behavioural science, law, innovation theory, marketing, and business.

EVENTS

• Discussion on People's Bank of China's (PBOC) Consultation Draft on Data Security (online, 17 Aug 2023): In this webinar, the expert panel will discuss the newly issued consultation draft of the Administrative Measures on Data Security in Business Fields Regulated by PBoC and the potential impact of the requirements on financial institutions operating in China. They will share their views on the principles in relation to data security proposed to be adopted by PRC financial regulators and how these principles fit in together with existing data regimes in China. The speakers will also discuss comments that can be raised to PBoC as well as actions to be taken by international financial institutions by reviewing their existing intragroup/internal arrangements and reconciling with the coming rules. | Registration form.