Global Weekly Fintech Update
01 March 2021
01 March 2021
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. Watch the video here to hear more.
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CLIFFORD CHANCE PUBLICATIONS AND MATERIALS
- Clifford Chance article – Enforcement trends as revealed in the SFC's Oct/Dec 2020 quarterly report (including the regulation of virtual asset trading platforms)
- Clifford Chance briefing – OFAC risk isn't virtual for digital currency payment processors
- Talking Tech videos – Tech trends 2021:
- Predictions for tech, human rights due diligence and ESG with Louise Brown
- Predictions for tech, human rights and ESG with Adam Hunter
- Predictions for the Consumer Goods and Retail Sector with Dessislava Savova
- Predictions for tech M&A, global productivity and tech in Africa with Jennifer Mbaluto
- Predictions for AI and data ethics, internet regulation and cybersecurity with Herbert Swaniker
- Predictions for tech-related enforcement and litigation with Samantha Ward
The HM Treasury-commissioned Review published today by former Worldpay Chief Ron Kalifa OBE sets out a strategy for ensuring that the UK can deliver on its ambitions to maintain its fintech leadership post-Brexit. Some of the highlights in the 106-page report include the creation of a £1bn fintech growth fund as well as a new Digital Economy Taskforce and world-first regulatory "Scalebox", listing rule tweaks to make fundraising easier and the cultivation of 10 regional fintech clusters.
GLOBAL LEGAL AND REGULATORY UPDATES
- (25 Feb 2021) Financial Action Task Force (FATF) update following its plenary sessions held on 22, 24 and 25 February 2021. The update sets out the work FATF is doing and intends to do under its key strategic initiatives. Among other things, it notes that it intends to launch, at the beginning of March, a consultation on proposed changes to its guidelines on cryptocurrencies and virtual asset service providers.
- (25 Feb 2021) Letter from the Chair of the Financial Stability Board (FSB), Randal K. Quarles, to G20 Finance Ministers and Central Bank Governors on the FSB's 2021 work programme, which includes, among other things, a further review of the regulatory and supervisory approaches to global stablecoins
- (23 Feb 2021) The People's Bank of China, the Hong Kong Monetary Authority, the Bank of Thailand and the Central Bank of the United Arab Emirates have announced they are collaborating on a central bank digital currency (CBDC) project for cross-border payments. The project will develop a proof-of-concept to facilitate real-time cross-border foreign exchange payment-versus-payment transactions and consider 'pain points' in cross-border transfers. | Press release
- (23 Feb 2021) International Capital Market Association roadmap for fintech related regulatory and legislative initiatives, which covers the period 2021 to 2024.
- (25 Feb 2021) Subcommittee on National Security, International Development and Monetary Policy hearing on the financing of domestic terrorism. The hearing considered, among other things, the use of cryptocurrencies and crowdfunding to finance the recent storming of the Capitol. Witnesses called for better online moderation and data gathering but did not seek to establish new surveillance or domestic terror powers for the US Government. | Memorandum
- (24 Feb 2021) Federal Reserve article on the preconditions required to launch a general purpose CBDC
- (22 Feb 2021) Speech by Securities and Exchange Commission (SEC) Commissioner Hester Peirce on the digital economy, in which Peirce states that decentralised finance (DeFi) could be the alternative to legacy financial systems that people are seeking, particularly given the anti-Wall Street sentiments following the GameStop short squeeze controversy. She notes that regulators must provide both legal clarity and freedom to experiment so that DeFI can compete with centralised finance.
- (23 Feb 2021) Australian Competition and Consumer Commission (ACCC) priorities for compliance and enforcement in 2021, which include, among other things, continued investigations into the practices of digital platforms and the issues associated with the AdTech and apps markets | Speech by ACCC Chair Rod Sims on the launch of the priorities.
- (20 Feb 2021) China Banking and Insurance Regulatory Commission measures (in Chinese) which introduce a requirement that online lending platforms must contribute 30% of the funding for loans they offer in partnership with banks and a cap on the amount of capital commercial banks can commit to online lending in cooperation with tech platforms.
- (23 Feb 2021) The Hong Kong Monetary Authority and the Central Bank of the United Arab Emirates have signed a memorandum of understanding, under which the two institutions agree to strengthen their cooperation in the promotion of innovative financial services and regulatory development in their respective jurisdictions and to collaborate on a joint CBDC project (m-CBDC Bridge), with the Bank of Thailand and the People's Bank of China. | Press release | See our table of fintech cooperation agreements for more information and a full list of international agreements.
- (24 Feb 2021) National Institution for Transforming India approach paper on the ethical considerations pertaining to the use of AI, which follows on from the Government's proposed strategy to use AI in governance areas such as healthcare, agriculture and education, as well as the private sector. | Press release
- (18 Feb 2021) Reserve Bank of India guidelines on setting up a robust governance structure and implementing minimum standards of security controls for digital payment products and services.
- (25 Feb 2021) Securities and Exchange Commission consultation (in Thai) on proposed requirements regarding qualifications, experience and income for people wishing to invest in digital assets | Press release
- (26 Feb 2021) European Securities and Markets Authority (ESMA) consultation on draft regulatory and implementing technical standards (RTS and ITS) under Regulation (EU) 2020/1503 on European crowdfunding service providers for business (ECSP Regulation). The proposed RTS and ITS cover topics such as complaints handling, reporting and marketing requirements, suitability tests for investors, and applications for authorisation. Responses are due by 28 May 2021. | Press release
- (24 Feb 2021) Recording of hearings held by the EU Parliament's Internal Market and Consumer Protection Committee and Economic and Monetary Affairs (ECON) Committee (starts at 17:50) on the proposed Digital Services Act and the Digital Markets Act | Press release
- (24 Feb 2021) ESMA Q&As on the use of special purpose vehicles for the provision of crowdfunding services under the ECSP Regulation
- · (23 Feb 2021) Introductory statement by ESMA Chair, Steven Maijoor, to the ECON Committee on the regulatory implications of the trading in GameStop shares and related phenomena
- (23 Feb 2021) MEP Stefan Berger, the EU Parliament rapporteur for the proposed regulation on markets in cryptoassets (MiCA), has made some comments about the contents of his draft report, which was submitted for debate on 25 February 2021. Among other things, Berger calls for the European Central Bank (ECB), ESMA and the European Banking Authority to be granted the power to issue binding opinions regarding the approval of new cryptocurrencies, like Diem, rather than non-binding opinions for the consideration of national authorities as proposed by the EU Commission. | Press release (in German)
- (22 Feb 2021) ECB opinion on the EU Commission's proposed MiCA Regulation. The ECB supports the overall aims of the regulation but believes there are some areas of the proposal, particularly relating to the responsibilities of the ECB, the Eurosystem and the European System of Central Banks (ESCB), that require adjustment.
- (19 Feb 2021) EU Commission draft adequacy decisions for transfers of personal data to the UK under the General Data Protection Regulation and the Law Enforcement Directive. The draft implementing decisions are necessary to ensure data flows continue between the EEA and UK following the expiry of the conditional interim regime agreed in the EU-UK Trade and Cooperation Agreement. | EU press release | UK press release
- (17 Feb 2021) Association Française de la Gestion Financière position paper on the EU Commission's proposed regulation on a pilot regime for market infrastructures based on distributed ledger technology
- (24 Feb 2021) Banco de Portugal warning (in Portuguese) regarding the risks associated with virtual assets. Among other things, the Bank reminds consumers that virtual assets are not legal tender in Portugal and may be subject to extreme price volatility.
- (22 Feb 2021) Financial Supervisory Authority thematic review of the market for financial instruments with underlying cryptoassets | Press release
- (25 Feb 2021) Final report from the independent review of the UK fintech sector by Ron Kalifa OBE. The review was requested in the 2020 Budget in order to identify priority areas to support the sector, encourage growth and widespread adoption of UK fintech and to maintain the UK's global fintech reputation. | Executive summary | Press release | Clifford Chance summary
- (23 Feb 2021) Bank of England (BoE) report on its plans to transform data collection in the financial sector over the period 2021-2031. Among other things, the BoE intends to establish a joint work programme with the Financial Conduct Authority and industry to address the current strains on data suppliers and data collectors. | Press release | Dear CEO letter
- (22 Feb 2021) Government response to the House of Lords Liaison Committee's report on AI, which examined the progress made by the Government in implementing recommendations made in 2018 by the Select Committee on AI. The Government sets out the actions it intends to take to address the Committee's recommendations, including publishing research on barriers to data availability, investigating how to make the use of algorithmic-assisted decision-making within the public sector more transparent and establishing an AI centre within the Ministry of Defence to accelerate the research, development, and deployment of military AI.
- (22 Feb 2021) BoE article on the impact of COVID-19 on the performance of machine learning models used by UK banks.
- (22 Feb 2021) House of Commons Library briefing paper on the Government's proposals, announced in the 2018 Budget, to introduce a Digital Services Tax to address some of the issues raised by digitalisation and the emergence of major tech companies.
- (23 Feb 2021) The Hong Kong Monetary Authority and the Central Bank of the United Arab Emirates have signed a memorandum of understanding, under which the two institutions agree to strengthen their cooperation in the promotion of innovative financial services and regulatory development in their respective jurisdictions and to collaborate on a joint CBDC project (m-CBDC Bridge), with the Bank of Thailand and the People's Bank of China. | Press release | See our table of fintech cooperation agreements for more information and a full list of international agreements..
CLIFFORD CHANCE EVENTS
Perspectives series: Post GameStop – a fresh look at market behaviour in the digital age (23 March 2021):
In the wake of the social media fuelled trading interest in GameStop and other assets, the focus of regulators is turning to whether this might have involved any breach of securities or commodities laws and whether increased regulation may be required around payments for order flow. Join us for our webinar where we will discuss these issues in the context of UK and US regulation of market behaviour, looking at key differences and what future regulation might involve. | To register, please see the event registration form.
Perspectives series: The shifting global regulatory outlook for stablecoins (25 March 2021):
Stablecoins – privately issued cryptocurrencies designed to have limited price volatility – have received growing attention since Facebook’s announcement of its proposed global stablecoin Diem (formerly Libra) in 2019 and the resulting regulatory backlash. Advocates hail them as an unmatched tool for financial inclusion and limiting financial crime, by linking payments to identity, while critics have concerns around regulatory standards and financial stability. Join us for this online panel session, in which our panellists will consider how the international regulatory response is evolving, how stablecoins can be successfully issued across key global financial centres and the risks and regulatory challenges to be aware of. | To register, please see the event registration form.
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