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

Survey of Cybersecurity Disclosures in Annual Reports on Form 10-K Filed by Selected Well-Known Seasoned Issuers

CLIFFORD CHANCE PUBLICATIONS

• (4 Jun 2024) Talking Tech – Cybersecurity and the ASX Listing Rules: Key Takeaways from the Updated Guidance Note 8
• (3 Jun 2024) Talking Tech – Clifford Chance and African Counsel and Government Counsel Forum on AI in Africa
• (31 May 2024) Clifford Chance briefing – Survey of Cybersecurity Disclosures in Annual Reports on Form 10-K Filed by Selected Well-Known Seasoned Issuers
• (29 May 2024) Talking Tech – Liability for AI – the next legislative challenge for the EU

GLOBAL LEGAL AND REGULATORY UPDATES, INDUSTRY GUIDANCE AND PUBLICATIONS

International

• (4 Jun 2024) The Bank for International Settlements (BIS) has launched Project Rialto to explore how instant cross-border payments could be improved using a modular foreign exchange (FX) component combined with settlement in wholesale central bank digital currencies (wCBDC). | Project webpage
• (30 May 2024) BIS Bulletin No. 87, which argues that the tokenisation of correspondent banking, as embodied in its current Project Agorá, could unlock streamlined pre-screening and atomic settlement, and pave the way for superior customer verification and anti-money laundering (AML) procedures. | Webpage

Americas

US:  

• ·      (30 May 2024) New York State Department of Financial Services (NYDFS) Superintendent Adrienne A. Harris has issued new guidance requiring NYDFS-regulated virtual currency entities to maintain and implement effective policies and procedures to promptly address customer service requests and complaints. In particular, the guidance requires such entities to collect relevant data so that the Department can assess whether they are resolving customer service requests and complaints in a timely and fair manner. | Press release
• ·      (29 May 2024) US Department of the Treasury Illicit Finance Risk Assessment of Non-fungible Tokens (NFTs) . The risk assessment explores how vulnerabilities associated with NFTs and NFT platforms may be exploited by illicit actors for money laundering, terrorist financing, and proliferation financing. The assessment finds that NFTs are highly susceptible to use in fraud and scams and are subject to theft.  The report determines that illicit actors can use NFTs to launder proceeds from predicate crimes, often in combination with other methods to obfuscate the illicit source of proceeds of crime. It also found little evidence of the misuse of NFTs by terrorists or proliferators, in contrast to fraudsters, to date. | Press release

Europe

EU:

• (3 Jun 2024) European Central Bank (ECB) consultation on its new guide on outsourcing cloud services to cloud service providers. The guide is intended to clarify both the ECB’s understanding of related legal requirements and its expectations for the banks it supervises. Deadline for comments: 15 July 2024. | Press release
• (31 May 2024) The European Supervisory Authorities (ESAs) have published a set of tools and templates for use by financial entities wishing to participate in the voluntary exercise in preparation for the implementation of the Digital Operational Resilience Act (DORA). | Press release
• (31 May 2024) European Securities and Markets Authority (ESMA) final report on draft technical standards in relation to conflicts of interests of cryptoasset service providers (CASPs) under the Markets in Cryptoassets Regulation (MiCA). | Press release
• (30 May 2024) The EU Council has formally adopted the proposed banking package comprising amendments to the Capital Requirements Regulation and Directive (CRR3/CRD6). The package includes a transitional regime for the risk-weighting of EU banks' exposures to cryptoassets that will apply until new legislation implements the Basel Committee's standard on cryptoassets, as well as new provisions on the reporting, disclosure, governance and supervisory review of cryptoasset exposures. | Press release
• (30 May 2024) The EU Council has formally adopted a series of legislative proposals that form the EU Commission's July 2021 anti-money laundering and counter terrorist financing (AML/CTF) package. Amongst other things, the package expands the list of obliged entities to cover the majority of the crypto sector, and introduces specific enhanced due diligence measures for cross-border correspondent relationships for cryptoasset service providers. | Press release
• (30 May 2024) The following four Delegated Regulations under MiCA have been published in the Official Journal: Commission Delegated Regulation (EU) 2024/1506 specifying certain criteria for classifying asset-referenced tokens and e-money tokens as significant; Commission Delegated Regulation (EU) 2024/1507 specifying the criteria and factors to be taken into account by ESMA, the European Banking Authority (EBA) and competent authorities in relation to their intervention powers; Commission Delegated Regulation (EU) 2024/1504 specifying the procedural rules for the exercise of the power to impose fines or periodic penalty payments by the EBA on issuers of significant asset-referenced tokens and issuers of significant e-money tokens; and Commission Delegated Regulation (EU) 2024/1503 specifying the fees charged by the EBA to issuers of significant asset-referenced tokens and issuers of significant e-money tokens. The four Delegated Regulations will enter into force on 19 June 2024.
• (30 May 2024) The following two Delegated Regulations supplementing provisions relating to ICT third-party service providers under DORA have been published in the Official Journal: Commission Delegated Regulation (EU) 2024/1502 specifying the criteria for the designation of ICT third-party service providers as critical for financial entities; and Commission Delegated Regulation (EU) 2024/1505 determining the amount of the oversight fees to be charged by the lead overseer to critical ICT third-party service providers and the way in which those fees are to be paid. Both Delegated Regulations will enter into force on 19 June 2024.
• (30 May 2024) ESMA statement providing initial guidance to firms using artificial intelligence (AI) when providing retail investment services. The statement, which is intended to ensure compliance with MiFID2 obligations, outlines principles and controls relating to the use of AI systems in any form, including third-party AI technologies. | Press release
• (29 May 2024) The EU Commission has unveiled its AI Office, which is intended to enable the future development, deployment and use of AI in a way that fosters societal and economic benefits and innovation, while mitigating risks. The Office will play a key role in the implementation of the AI Act, especially in relation to general-purpose AI models, and will also work to foster research and innovation in trustworthy AI. | Press release

Middle East

Israel:

·      (28 May 2024) The Bank of Israel has announced the 'Digital Shekel Challenge', an experiment inspired by the Bank for International Settlements (BIS) Innovation Centre's Project Rosalind.  In the experiment, the Bank of Israel is inviting entities from the private, public and academic sectors to explore the development potential of uses of the digital shekel system. The Bank has built a technological prototype simulating the heart of the digital shekel system at the Bank of Israel and its application programming interface (API) layer. Payment service providers and other service providers will receive access to the system and a range of functions through which they will be able to develop and make services available to end users from the general public, and provide advanced payment options with digital shekel. | Press release (in Hebrew)

EVENTS

• Global Financial Markets Perspectives Series: AI Series: Contracting for AI (online, 13 June 2024): What makes procuring AI different from procurement of other software or services? How does this affect your contract terms and supplier onboarding and management processes? When there is limited scope for negotiation, where should you focus your efforts? In this session we will discuss strategy and practical tips for contracting for AI. | To register, please see the event series registration form