Global Fintech Update
15 November 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.
CLIFFORD CHANCE BRIEFINGS AND MATERIALS
- (10 Nov 2023) Clifford Chance briefing – On the cyber attack: how are the FCA and PRA regulating cyber risk?
- (9 Nov 2023) Clifford Chance briefing – The UK online safety regime
On 1 and 2 November the UK government hosted its AI safety summit. It brought together 28 countries and organisations including the United States, European Union and China to discuss the risks posed by ‘frontier’ artificial intelligence models, risks that they pose and how to address them. The summit made significant progress in a number of areas including the publication of several research reports, the establishment of an international AI Safety Institute, and the signing of the Bletchley Declaration to drive a shared understanding of and approach to AI’s risks and opportunities. Alongside the summit, Clifford Chance and a range of organisations held the AI Fringe, bringing together civil society, advocacy groups, research organisations and academics as well as companies and the public. In this article, we look at what key themes emerged from these steps towards achieving greater clarity and unity of purpose on the topic of AI regulation, law, and policy at a global level.
GLOBAL LEGAL AND REGULATORY UPDATES, INDUSTRY GUIDANCE AND PUBLICATIONS
- (15 Nov 2023) International Monetary Fund (IMF) Central Bank Digital Currency (CBDC) Virtual Handbook, which is intended to collect and share knowledge, lessons, empirical findings, and frameworks to address policymakers’ most frequently asked questions on CBDCs. The IMF intends to add new chapters every year as its body of knowledge and analysis in this area grows, aiming to provide about twenty chapters by 2026. Chapters will also be periodically updated, reflecting evolving views. | Launch event webpage: Central Bank Digital Currency - Emerging Good Practices | Speech by IMF Managing Director Kristalina Georgieva | IMF staff report on initial considerations for CBDC
- (15 Nov 2023) Basel Committee on Banking Supervision (BCBS) discussion paper which provides a high-level assessment of the supervisory and financial stability implications of digital fraud for the global banking system, including existing data availability and measures to mitigate such risks. | Webpage | Press release
- (14 Nov 2023) The Financial Stability Board (FSB) Plenary has met in Basel to discuss the outlook for global financial stability. Amongst other things, Members stressed the importance of global and consistent implementation of the FSB’s high-level recommendations for the regulation, supervision and oversight of cryptoasset markets and activities and of global stablecoin arrangements, including in non-FSB jurisdictions, and of actions to guard against the risk of regulatory arbitrage, in cooperation with the standard-setting bodies and relevant international organisations. Members also discussed the FSB’s work programme for 2024, the priorities of which include (i) advancing work on the global regulatory and supervisory framework for cryptoasset markets and activities; (ii) enhancing cross-border payments; (iii) strengthening cyber and operational resilience; and (vi) financial innovation. | Press release
- (10 Nov 2023) Joint statement by countries including the UK, Australia, Belgium, Brazil, Canada, France, Germany, Italy, Japan, Korea, Luxembourg, Netherlands, Singapore, Spain and the US, on their collective engagement to implement the Organisation for Economic Co-operation and Development (OECD) Crypto-Asset Reporting Framework (CARF). The CARF provides for the automatic exchange of information between tax authorities on crypto exchanges for the purpose of combating offshore tax avoidance and evasion. The joint statement announces the signatory jurisdictions’ intention to implement the framework in time to commence exchanges by 2027.
- (9 Nov 2023) Financial Action Task Force (FATF) report on illicit financial flows from cyber-enabled fraud
- (8 Nov 2023) Bank for International Settlements (BIS) paper (No. 141), entitled ‘Will the real stablecoin please stand up?’, which provides an overview of the evolution of the stablecoin market over the past decade and examines whether stablecoins have stayed true to their name in terms of being ‘stable’. | Webpage
- (8 Nov 2023) Speech by Agustín Carstens, General Manager of the BIS, on securing the future monetary system, in which he noted that CBDCs, whether in wholesale form as a type of digital central bank reserve or in retail form as a digital banknote, will sit at the core of the future financial system.
- (9 Nov 2023) Australian Taxation Office guidance on the capital gains tax (CGT) treatment of decentralised finance (DeFi) and wrapping crypto tokens.
- (15 Nov 2023) Monetary Authority of Singapore (MAS) press release on its work with the financial industry to expand asset tokenisation initiatives and develop foundational capabilities to scale tokenised markets as part of Project Guardian.
- (14 Nov 2023) Speech by Andrea Enria, Chair of the Supervisory Board of the European Central Bank (ECB), on the Markets in Cryptoassets Regulation (MiCA) and its coordination with EU financial markets legislation. Enria argued that recent developments have strengthened the case for directly regulating cryptoasset activities, highlighted certain problematic aspects of MiCA, and set out his view of how the most advanced forms of decentralised finance (DeFi) pose a fundamental challenge to the very application of financial regulation and supervision. He concluded by outlining what he believes are the basic elements of a regulatory and supervisory framework which sets the boundaries and polices interactions between the crypto industry and the banking sector.
- (9 Nov 2023) The EU Parliament plenary session has approved the proposed regulation on harmonised rules on fair access to and use of data (Data Act). The Data Act sets out new rules regarding the use of data generated by Internet of Things (IoT) devices. The Act still needs to be approved by the EU Council. | Press release | Adopted text
- (9 Nov 2023) The European Securities and Markets Authority (ESMA) has announced that it is changing its Union Strategic Supervisory Priorities (USSPs) to focus on cyber risk and digital resilience. The new USSP will come into force in 2025, at the same time as the Digital Operational Resilience Act (DORA). | Press release
- (8 Nov 2023) The EU Commission has published for consultation four Delegated Regulations setting out additional criteria on the supervision of cryptoassets under MiCA. The draft Delegated Regulations cover: the procedural rules for the exercise by the European Banking Authority (EBA) of its power to impose fines or periodic penalty payments on issuers of significant asset-referenced tokens (ARTs) and e-money tokens (EMTs);the criteria and factors to be taken into account by the EBA, ESMA and competent authorities when exercising their product intervention powers under MiCA (i.e. their powers to restrict or ban the sale of cryptoassets or related activities);the criteria for classifying ARTs and EMTs as significant; and the supervisory fees that can be charged by the EBA to issuers of significant ARTs and EMTs. Deadline for comments: 6 December 2023.
- (8 Nov 2023) ECB working paper on global and local drivers of Bitcoin trading vis-à-vis fiat currencies.
- (6 Nov 2023) Speech by Dr Joachim Nagel, President of the Deutsche Bundesbank, in which he outlined three key reasons for introducing a digital euro: (i) the digital transition in the payments space; (ii) the protection of privacy; and (iii) sovereignty in payments. He also discussed some of the risks associated with the introduction of central bank digital currencies (CBDCs) and how the Eurosystem intends to address those risks.
- (6 Nov 2023) Joint guidance on combating the use of unlicensed virtual asset providers in the United Arab Emirates, issued by the National Anti-Money Laundering and Combating Financing of Terrorism and Financing of Illegal Organizations Committee
- Global Financial Markets Perspectives Series: AI Series: Intellectual property and artificial intelligence – a review of new legal challenges (online, 28 November 2023): In this session we will look at the key IP issues for businesses arising from AI. We will focus on the use of AI, including large language models and generative AI, as well as legal questions around the concepts of inventorship and patentability. | To register, please see the event series registration form
- Global Financial Markets Perspectives Series: Space tech for smart cities (online, 5 December 2023): Smart cities are using technology to make cities faster, smarter, more efficient and sustainable. The market for smart city related services is growing fast, with the European Space Agency referencing a forecast growth of +57% between 2020-2025. Many of these smart city services and associated technology are heavily reliant, if not entirely dependent, on space tech. Our panel will explore the importance of space tech to smart cities, the latest developments, and the opportunities and risks for financial investors in the sector. | To register, please see the event series registration form