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Global Weekly Fintech Update

27 January 2020

27 January 2020

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.

Please click here to subscribe to future editions of the round-up.

CLIFFORD CHANCE PUBLICATIONS AND MATERIALS

Talking Tech video – The regulation of cryptoassets: a view of the EU

Talking Tech article – Japan Financial Services Agency releases draft ordinances to implement new regulation of initial coin offerings and securities token offerings

Clifford Chance article – Regulatory, investigations and financial crime in the UK – horizon scan: top 10 topics for 2020, including the extension of the EU anti-money laundering regime to cryptoasset firms and the allocation of risk in artificial intelligence

Clifford Chance briefing – Artificial intelligence risk: what does 2020 hold?

Talking Tech article – Crypto exchange providers and 'custodian wallet providers' become subject to the UK money laundering laws

SPOTLIGHT

Case analysis: Stolen Bitcoin frozen as court finds that Bitcoin is property: ransomware hackers told to let it go

In an English judgment published last week, an insurer has obtained a proprietary injunction over $950,000 worth of Bitcoin paid in "ransom" after a cyber attack. 

GLOBAL LEGAL AND REGULATORY UPDATES

International

  • (24 Jan 2020) Bank for International Settlements report on its survey regarding the use of central bank digital currencies.
  • (21 Jan 2020) A new central bank group comprising the central banks of Canada, England, Japan, Sweden and Switzerland, along with the European Central Bank and the Bank for International Settlements has formed to share experiences as they assess the potential cases for central bank digital currencies in their home jurisdictions. | Press release.
  • (20 Jan 2020) World Economic Forum (WEF) Head of Blockchain and Distributed Ledger Technology (DLT), Sheila Warren, and WEF Blockchain and DLT Project Specialist, Sumedha Deshmukh, opinion article on the WEF's plans to create a blockchain 'bill of rights', which will set out how users can and should be protected as blockchain technology develops.

Americas

US:  

  • (16 Jan 2020) Virtual Currency Tax Fairness Act (H.R. 5635) ​introduced to Congress by Suzan DelBene. The Bill would amend the Internal Revenue Code to provide a de minimis exemption for personal transactions made with virtual currency whose gains are less than or equal to US$200, and would require the Secretary of the Treasury to issue regulations for those virtual currency transactions whose gains exceed US$200.
  • ​(16 Jan 2020) House of Representatives Committee on Financial Services letter to the Government Accountability Office requesting information on the benefits and drawbacks of alternative data in mortgage lending and the role of the federal government in overseeing the use of alternative data by credit reporting agencies and lenders. | Press release​.
  • (14 Jan 2020) Federal Deposit Insurance Corporation consultation on the establishment of an innovation pilot program framework to allow firms to test innovative products and services within a regulatory environment.

APAC

Australia:     

  • (21 Jan 2020) Australian Prudential Regulation Authority submission to the Senate Select Committee on Financial Technology and Regulatory Technology, setting out a proposed regulatory framework for fintech and regtech.

Hong Kong:

  • (22 Jan 2020) Hong Kong Monetary Authority (HKMA) and Bank of Thailand (BOT) report on their joint central bank digital currency research project. Amongst other things, the report details the HKMA and BOT's successful development of a cross-border blockchain network prototype to facilitate payments arising from trade activities between Hong Kong and Thailand. | Press release

India:

  • (24 Jan 2020) The Bahrain Economic Development Board and the Government of Karnataka, India, have signed a memorandum of understanding in which they agree to encourage growth, nurture start-ups and develop education programmes in the areas of artificial intelligence, fintech and other emerging technologies in both jurisdictions | Press release | See our table of fintech cooperation agreements for more information and a full list of international agreements.
  • (23 Jan 2020) Securities and Exchange Board of India Chairman, Ajay Tyagi, speech on the potential benefits of using blockchain technology, artificial intelligence and machine learning in the securities market.

Japan:           

  • (14 Jan 2020) The Financial Services Agency of Japan has released a set of draft ordinances that will ​amend the Financial Instruments and Exchange Act to introduce a new regulatory framework for initial coin offerings and security token offerings | Press release​ (in Japanese). | Clifford Chance summary

Thailand:      

  • (22 Jan 2020) Hong Kong Monetary Authority (HKMA) and Bank of Thailand (BOT) report on their joint central bank digital currency research project. Amongst other things, the report details the HKMA and BOT's successful development of a cross-border blockchain network prototype to facilitate payments arising from trade activities between Hong Kong and Thailand. | Press release

Europe

EU:  

  • (23 Jan 2020) EU Parliament draft resolution which is intended to establish a framework to protect consumers from the rapid development of artificial intelligence and automated decision-making (ADM) technologies. Amongst other things, it requires that humans must always be ultimately responsible for, and able to overrule, decisions that are taken using ADM processes, especially in particular sectors, such as the banking sector. | Press release.

Luxembourg:              

  • (15 Jan 2020) Commission de Surveillance du Secteur Financier communique on recent developments in the regulation of virtual assets and their service providers, including the adoption of recent Financial Action Taskforce documents and the imminent implementation of the fifth Anti-Money Laundering Directive.

UK:

  • (23 Jan 2020) The Financial Conduct Authority and Bank of England have announced they are establishing a forum to facilitate dialogue with the public and private sectors regarding the use, benefits and impact of artificial intelligence and machine learning in the financial services sector. | Forum's terms of reference | Press release​.
  • (22 Jan 2020) Bank of England Executive Director for Financial Market Infrastructure, Christina Segal-Knowles, speech on the future of payments regulation, in which she discusses unbundling, payments innovation and stablecoins.
  • (13 Dec 2019 – published on 17 Jan 2020 following the lifting of reporting restrictions) A case heard in the High Court (Queen's Bench Division) has ruled that Bitcoin is a property and granted a proprietary injunction to an English insurer (acting on behalf of its client, a Canadian insurer who was granted anonymity in the proceedings) over US$950,000 in Bitcoin, which the Canadian insurer paid in ransom following a cyber security attack. | Judgment | Clifford Chance summary.

Middle East

Bahrain:

(24 Jan 2020) The Bahrain Economic Development Board and the Government of Karnataka, India, have signed a memorandum of understanding in which they agree to encourage growth, nurture start-ups and develop education programmes in the areas of artificial intelligence, fintech and other emerging technologies in both jurisdictions | Press release | See our table of fintech cooperation agreements for more information and a full list of international agreements.

CLIFFORD CHANCE EVENTS

London – Launching our joint white paper on smart derivatives contracts (29 Jan 2020):
Clifford Chance, ISDA, R3 and the Singapore Academy of Law are hosting a drinks and canape reception in London to mark the upcoming release of our joint white paper on the private international law aspects of smart derivatives contracts utilising distributed ledger technology (DLT). The reception will be preceded by a panel discussion which will cover the specific private international law issues raised in the white paper that may occur when trading derivatives in a DLT environment, as well as recommendations for clarifying or resolving these issues. The panel will also consider two different examples of derivatives transactions, both of which use ISDA documentation and are built on Corda, an enterprise blockchain and smart contract platform developed by R3. | For more information and to RSVP see the event webpage

London – In conversation with Huw van Steenis (5 Feb 2020, 5:15pm to 6:30pm):
Clifford Chance is delighted to host a conversation with Senior Advisor to the Chief Executive of UBS and former Senior Advisor to the Governor of the Bank of England, Huw van Steenis. Huw's recent review of the future of the financial system for the Bank of England showed that he is one of the leading thinkers in the world on where the financial system goes next – from technology and data regulation to climate change and cyber attacks. Clifford Chance partner Simon Gleeson will be in conversation with Huw, discussing topics such as the future of money and payments, whether the current bank business model is sustainable, how finance might be raised in the future, and how the interaction between the internet giants and the financial system might play out. | For more information and to RSVP please contact our events team.