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: Clifford Chance Briefing – Regulating the Digital Economy

Clifford Chance experts Meera Ragha, Diego Ballon Ossio, Daniel Schwarz, Jamie Andrew and Nicola Hemsley discuss regulating the digital economy with Financier Worldwide.  Read the full article in Financier Worldwide Magazine.

GLOBAL LEGAL AND REGULATORY UPDATES, INDUSTRY GUIDANCE AND PUBLICATIONS

International

• (21 Jun 2022) Bank for International Settlements (BIS) Innovation Hub report in which it sets out the findings from four projects on the use of wholesale central bank digital currencies (CBDCs) for cross-border transfers. The projects were conducted by BIS and the central banks of Switzerland and France (Project Jura) ), Hong Kong, Thailand, China and the UAE (Project Inthanon- LionRock2 and Project mBridge), and Australia, Malaysia, Singapore and South Africa (Project Dunbar). | Press release
• (21 Jun 2022) BIS chapter from its upcoming annual economic report, which sets out BIS's vision for a future digital monetary system. In short, BIS calls for a monetary system based on CBDCs, which it states balance innovation with safety and stability, unlike other cryptoassets or decentralised finance (DeFi). The chapter also discusses the structural limitations that prevent distributed ledger technologies (DLTs) from processing a high volume of transactions, and the best regulatory approaches to mitigating the potential risks posed by DeFi and the crypto-sector. | Press release
• (17 Jun 2022) BIS Innovation Hub has announced a new set of projects under its 2022 work programme, including the creation of an open-source market intelligence platform to share information on the cryptocurrency market, and testing of potential cryptographic solutions for secure payment and settlement systems that can withstand the security risks posed by quantum computing. | Press release
• (17 Jun 2022) Financial Action Task Force (FATF) report on the outcomes from its plenary meeting which was held on 14-17 June 2022. Among other things, attendants finalised an update on the implementation of the FATF anti-money laundering and counter terrorist financing standards on virtual assets and virtual asset service providers, which the FATF intends to publish by the end of June. The report also provides an update on emerging risks and market developments in the virtual asset space, including DeFi, non-fungible tokens (NFTs) and unhosted wallets.
• (16 Jun 2022) BIS report on crypto-miners' roles as financial market intermediaries and the risks this may pose. | Summary

Africa

Central African Republic:        

• (14 Jun 2022) Tweet from President Faustin-Archange Touadéra, in which he reaffirms the country's decision to grant Bitcoin status as legal tender.

Americas

US:  

• (17 Jun 2022) Federal Reserve Board monetary policy report, in which it highlights stablecoins as a potential risk to financial stability due to their 'structural fragilities'.
• (16 Jun 2022) Letter from a group of Senators and House Representatives to the Environmental Protection Agency (EPA) requesting that the EPA reassesses the environmental impact of crypto-mining to take into account the potential benefits or mitigants, such as mining operations that use flared gas and renewable energy sources.
• (15 Jun 2022) Letter from the Chair of the House of Representatives Ways and Means Committee, Richard Neal, to the Government Accountability Office (GAO), in which he calls on the GAO to investigate and advise on the use of cryptocurrencies in retirement plans.
• (14 Jun 2022) Speech by Securities and Exchange Commission (SEC) Commissioner, Hester Peirce, on regulating the crypto-ecosystem. Among other things, Peirce discusses and criticises the SEC's rationale for not approving a spot Bitcoin exchange-traded product.

APAC

Kazakhstan:

• (16 Jun 2022) The Ministry of Digital Development, Innovations and Aerospace Industry has announced plans to launch a pilot project for crypto-exchanges licensed by the Astana Financial Service Authority. The pilot, which will run until the end of 2022, will allow licensed crypto-exchanges to open accounts with a set of Kazakh banks. | Press release (in Kazakh)

India:             

• (10 Jun 2022) Securities and Exchange Board of India (SEBI) caution to investors on the use of algorithmic trading services. SEBI advises investors to avoid dealing with platforms that offer algorithmic trading services and facilities to automate their trades, as they are unregulated in India.

Singapore:   

• (21 Jun 2022) The Monetary Authority of Singapore (MAS) has announced the first use case for NovA!, an artificial intelligence (AI) platform, funded under its National AI Programme. NovA! is designed to help financial institutions assess companies' environmental impact and identify emerging environmental risks. In its first application, it will be used to help financial institutions assess the sustainability performance of Singapore's real estate sector. | Press release

Europe

EU:  

• (21 Jun 2022) Speech by the Chair of the European Insurance and Occupational Pensions Authority, Petra Hielkema, on developments and innovation in the insurance sector. Among other things, Hielkema argues that the EU Commission's proposed AI Act should not include all insurance use cases of AI in its list of high-risk uses.
• (15 Jun 2022) Speech by Executive Board Member at the European Central Bank (ECB), Fabio Panetta, on the EU's digital euro project. Panetta discusses the potential benefits the digital euro will bring to consumers and the EU banking system. He also suggests that the ECB is considering capping the number of tokens at between 1 and 1.5 trillion.

Albania:        

• (15 Jun 2022) Speech by the Governor of the Bank of Albania, Gent Sejko, on the digitalisation of the banking sector. Sejko focuses on the introduction of open banking in Albania.

Italy:              

• (16 Jun 2022) Bank of Italy statement (in Italian) on the risks and opportunities posed by the use of DLT and cryptoassets by supervised entities.

Russia:          

• (14 Jun 2022) Bill (in Russian) amending certain acts in relation to the regulation of digital financial assets and utilitarian digital rights, which has been passed by the State Duma at first reading. The bill, if enacted, would prohibit the use of digital financial assets for payments for goods and services. | Bill overview webpage (in Russian)

Spain:            

• (21 Jun 2022) Speech by the Governor of the Bank of Spain, Pablo Hernández de Cos, on recent developments in the crypto-sector, the potential risks cryptoassets pose to financial stability, and the current regulatory response to those risks at both a global and national level.

UK:

• (16 Jun 2022) House of Commons Treasury Committee second report on its inquiry into the future of financial services regulation. Among other things, the report summarises the discussions the committee has been having with key stakeholders on the future regulation of cryptoassets, stablecoins and CBDCs. | Summary | Press release
• (15 Jun 2022) HM Treasury (HMT) report on the outcome of its consultation on amendments to the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017. Among other things, the report notes that HMT is modifying its initial proposals that would have required all senders of funds to unhosted wallets to collect identification details of recipients. Instead, cryptoasset businesses will only be expected to collect this information for transactions identified as posing an elevated risk of illicit finance.

Middle East

Israel:            

• (20 Jun 2022) Bank of Israel report setting out the findings from its experiment on the use of smart contracts and CBDCs for the sale of a car. | Press release

CO-OPERATION AGREEMENTS

• (17 Jun 2022) Japan's Financial Services Agency and the Financial Services Authority of Indonesia have signed a fintech cooperation agreement, under which they commit to sharing information on innovative trends in their financial sectors and establishing a referral mechanism to support the entry of their fintech businesses into each other's markets. | Press release | See the table of fintech cooperation agreements for more information and a full list of international agreements.