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 BRIEFING & MATERIALS

• Clifford Chance briefing – The changing digital advertising landscape: an overview of EU and UK competition cases and regulatory initiatives
• Clifford Chance briefing – The Digital Markets Act: a new era for the digital sector in the EU | Accompanying webinar

SPOTLIGHT - International Festival of Fintech

• Clifford Chance is delighted to invite you to our virtual International Festival of Fintech. Join us for three days of insightful fintech webinars featuring expert panel discussions and fireside chats with industry leaders and rising stars. Each session will focus on the fast-changing world of financial technology and the key legal and regulatory issues, covering topics such as: the impact of accelerated growth in crypto and digital currencies; the benefits and risks of new technologies such as quantum computing and distributed ledger technology (DLT); the development and regulation of digital assets; environmental, sustainable and governance topics including sustainable finance, carbon trading and sustainable bitcoin mining; and fintech in emerging markets. | For more information and to register, please see the event webpage.

GLOBAL LEGAL AND REGULATORY UPDATE

International

• (12 May 2022) Speech by the Chair of the Basel Committee on Banking Supervision, Pablo Hernández de Cos, on the committee's current activity around cryptoassets and decentralised finance (DeFi).
• (11 May 2022) Speech by the Chair of the Financial Stability Board (FSB), Klaas Knot, on the current stability challenges facing the global financial markets. Among other things, Knot highlights the risks posed by the rapid evolution of the cryptoassets market and notes that the FSB is prioritising work on the regulation and supervision of unbacked cryptoassets and stablecoins, and on the financial stability implications of DeFi.
• (9 May 2022) International Monetary Fund (IMF) statement following its official staff visit with the Bahamas. The IMF comments on the Bahamas central bank digital currency (CBDC) initiative, stating that it has potential to foster financial inclusion, but that it requires stronger internal capacity and oversight, and campaigns to educate citizens.
• (6 May 2022) Bank for International Settlements working paper setting out the results of its survey on CBDCs. The paper summarises feedback from 81 central banks on their engagement with CBDCs and the impact that the COVID-19 pandemic and the rapid development of cryptocurrencies has had on their work in this area. | Press release
• (6 May 2022) IMF working paper on the role of fintech on financial inclusion. The paper concludes that fintech has a higher positive correlation with digital financial inclusion than traditional measures of financial inclusion, with the greatest impact being seen in the class and rural divides, and the least impact being seen in the gender divide. | Summary

Americas

Chile:              

• (11 May 2022) Banco Central de Chile report (in Spanish) on the findings of its Internal Digital Payments Working Group, which was established in 2021 to explore the possibility of issuing a CBDC. The report highlights the benefits, risks and principles of issuing a CBDC, but notes that further evidence gathering and analysis is required before a final decision can be made about introducing a CBDC in Chile.

US:  

• (11 May 2022) Financial Accounting Standards Board summary of its board meeting, which notes that the board voted to begin a project to review the accounting for exchange-traded digital assets and commodities.
• (9 May 2022) Federal Reserve Board semi-annual report on financial stability, which flags stablecoins as a particular area of concern. The report argues that, as stablecoins are backed by assets that may lose value or become illiquid during stress, they are vulnerable to runs and redemption risks.
• (5 May 2022) Joint consultation from the Federal Deposit Insurance Corporation, the Federal Reserve and the Office of the Comptroller of the Currency on proposals to amend their implementation of the Community Reinvestment Act (which requires that regulators assess financial institutions' ability to meet the credit needs of their communities) to, among other things, ensure digital banks and banks' digital activities are included in assessments. Under the proposals, any bank with over USD 10 million in assets must have their digital activities evaluated. Responses on the consultation are due by 5 August 2022. | Press release

APAC

India:             

• (7 May 2022) Recording of a presentation by the National Securities Depository, in which it announces that it has launched, in collaboration with the Securities and Exchange Board of India, a distributed ledger technology-based platform for the monitoring of security and governance in the corporate bonds market.

The Philippines:                         

• (4 May 2022) The Bangko Sentral ng Pilipinas (BSP) has announced it is exploring the ways in which machine learning could enhance and streamline its central banking functions. In particular, BSP is exploring the application of machine learning to data validation processes and estimations of regional inflation and domestic liquidity. | Press release

Europe

EU:  

• (12 May 2022) European Central Bank paper on CBDCs and bank intermediation, which considers the potential impact of the introduction of a digital euro on EU banks' balance sheets and activities.
• (12 May 2022) European Securities and Markets Authority working paper on the potential financial stability risks posed by cloud outsourcing. The paper models the impact that the outage of a single cloud service provider could have on the EU financial market and sets out recommendations for mitigating these risks.
• (11 May 2022) The EU Parliament and EU Council have reached a provisional political agreement on the EU Commission's proposed Digital Operational Resilience Act (DORA). DORA seeks to establish a uniform set of requirements for the security of network and information systems of companies and organisations operating in the financial sector, as well as any critical third parties which provide information communication technologies services to them. The provisional agreement must now be formally approved by the EU Council and EU Parliament before being adopted. | EU Parliament press release | EU Council press release
• (10 May 2022) The EU Commission has launched a set of consultations on the revised Payments Services Directive (PSD2) and open finance. Under its digital finance and retail payments strategies, the EU Commission is conducting a comprehensive review of the application and impact of PSD2, including an overall assessment of whether it is still fit for purpose, taking into account market developments and emerging technologies. | Press release
• (6 May 2022) European Insurance and Occupational Pensions Authority feedback statement, which summarises the responses it received to its April 2021 consultation on the use of blockchain, smart contracts and other emerging technologies in insurance. | Press release

Germany:    

• (11 May 2022) Ministry of Finance guidance (in German) on the income tax treatment of virtual currencies and other tokens. | Press release (in German)

Malta:           

• (10 May 2022) Malta Financial Services Authority consultation on proposals to establish a fee structure for crowdfunding service providers licensed in Malta. Responses are due by 31 May 2022.

UK:

• (11 May 2022) Payment Systems Regulator (PSR) report, which summarises the conclusions of the PSR's independent panel on digital payments. The report sets out the current barriers to the take-up of digital payments and identifies potential regulatory solutions.
• (10 May 2022) The Government has announced the introduction of two bills containing provisions on cryptocurrencies, as part of the Queen's speech, delivered by Prince Charles at the state opening of Parliament. The Financial Services and Markets Bill is intended to establish the UK as a competitive and innovative leader in financial services, and under the provisions of the bill the government will be 'harnessing the opportunities of innovative technologies in financial services, including by supporting the safe adoption of cryptocurrencies and resilient outsourcing to technology providers'. The Economic Crime and Corporate Transparency Bill is intended to strengthen the authorities' abilities to tackle illicit finance and reduce economic crime, and includes the introduction of powers designed to allow cryptoassets to be seized and recovered more quickly and easily. | Speech | Briefing pack
• (6 May 2022) Government report setting out the findings of its consultation on the proposed design of a new regime for promoting competition in the digital markets. The report notes that respondents were generally supportive of the proposals and the government intends to implement them through legislation when parliamentary time allows. | Consultation webpage
• (6 May 2022) Department for Business, Energy and Industrial Strategy research paper on the effectiveness of the UK standards framework in supporting the development and commercialisation of emerging technologies in the UK.
• (5 May 2022) Speech by the Chief Executive of the Financial Conduct Authority (FCA), Nikhil Rathi, on how to capitalise on innovation. Rathi discusses the importance of digital and financial literacy as the lines between tech firms and financial services become increasingly blurred, and notes that a key priority of the Digital Regulation Cooperation Forum (of which the FCA is a member, along with other UK regulators) is building its digital regulatory skills.

Middle East

Israel:

• (9 May 2022) Bank of Israel report setting out the findings from its consultation on a potential CBDC. The bank notes it has not yet made a final decision on whether it will issue a digital shekel, but that the response to its consultation was largely positive. | Press release

UAE:

• (11 May 2022) The Abu Dhabi Global Market (ADGM) has announced the launch of its fifth RegLab sandbox programme, a testing environment designed to allow fintech innovators to develop applications and protocols in a controlled environment under the supervision of the ADGM's Financial Services Regulatory Authority. The theme for the fifth sandbox is DeFi. | Press release

Oceania

The Solomon Islands:

• (4 May 2022) The Central Bank of the Solomon Islands (CBSI) has announced the launch of its regulatory sandbox framework. The framework is intended to allow participants to test innovative financial services under the supervision of the CBSI. | Press release

EVENTS

Clifford Chance International Festival of Fintech (17-19 May 2022):

Clifford Chance is delighted to invite you to our virtual International Festival of Fintech. Join us for three days of insightful fintech webinars featuring expert panel discussions and fireside chats with industry leaders and rising stars. Each session will focus on the fast-changing world of financial technology and the key legal and regulatory issues, covering topics such as: the impact of accelerated growth in crypto and digital currencies; the benefits and risks of new technologies such as quantum computing and DLT; the development and regulation of digital assets; ESG topics including sustainable finance, carbon trading and sustainable bitcoin mining; and fintech in emerging markets. | For more information and to register, please see the event webpage.

Securities Finance Technology Symposium (19 May 2022):

Clifford Chance is pleased to be sponsoring the upcoming Securities Finance Technology Symposium, hosted by Securities Finance Times. The event will take place virtually and will be covering a range of regulatory drivers in this space, from CFTC Rewrite and UMR Phase 6 to collateral optimisation and blockchain, answering industry questions and discussing varying solutions. | To register, please see the event website