Weekly Global Fintech Update
26 July 2021
26 July 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.
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CLIFFORD CHANCE PUBLICATIONS AND MATERIALS
EU financial services horizon scanner | This horizon scanner identifies and summarises key upcoming EU legislative and non-legislative initiatives that are likely to impact firms providing financial services in the EU, with sections including payments, fintech, operational resilience, cyber and data.
Clifford Chance briefing – EU Commission puts the focus on the Digital Economy | This briefing is an extract from Global Competition Review's EMEA Antitrust Review 2022 publication
For those who missed the live session earlier this year, it's not too late to hear our global panel give their perspective on the development of central bank digital currencies (CBDCs). In this discussion, Clifford Chance experts considered the different approaches being taken by central banks globally, including the digital euro, renminbi and dollar, what practical adoption of CBDCs may look like and the legal structures that might be employed, and the consequences for businesses.
Or for those short on time, read the highlights in our recent article.
GLOBAL LEGAL AND REGULATORY UPDATES
- (12 Jul 2021) Bank of Canada report setting out the competition and innovation arguments for issuing a Canadian CBDC
- (22 Jul 2021) Central Bank of Colombia statement (in Spanish) announcing the launch of a pilot bond issuance, which will be negotiated and settled on the blockchain through the use of smart contracts. The pilot is being run in collaboration with the IDB Group and Banco Davivienda.
- (22 Jul 2021) National Credit Union Administration request for information on the impact of distributed ledger technology, decentralised finance, and other crypto-related tools on the credit union system. Responses are due by 20 September 2021.
- (21 Jul 2021) Speech by the Chair of the Securities and Exchange Commission (SEC), Gary Gensler, in which he briefly discusses the intersection of security-based swaps and cryptocurrencies. Gensler notes that cryptocurrencies whose prices depend on more traditional securities may have to comply with requirements under securities law.
- (19 Jul 2021) The President's Working Group on Financial Markets, comprising representatives from the Treasury, the Federal Reserve System, the SEC and the Commodity Futures Trading Commission, convened with representatives from the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) to discuss possible inter-agency work with regard to stablecoins. Among other things, the group announced the Treasury is preparing a report which will identify the potential benefits and risks of stablecoins, the current regulatory framework and its recommendations for addressing any regulatory gaps. | Press release
- (19 Jul 2021) Paper jointly written by a member of the Board of Governors of the Federal Reserve System and an academic at Yale University containing proposals to address the systemic issues posed by stablecoins, which include regulating private stablecoin issuers as banks and issuing a US CBDC.
- (13 Jul 2021) Joint consultation issued by the Board of the Federal Reserve System, FDIC and the OCC on proposed guidance for banks on managing relationships with third-parties, including fintech firms. Responses are due by 17 September 2021. | Press release
- (16 Jul 2021) People's Bank of China report on the progress of the working group established to research and develop the Chinese CBDC (or 'e-CNY'). The paper sets out the Bank's current position, objectives, design framework and policy considerations for the initiative. It notes there is currently no set timeline for the launch of the e-CNY.
- (14 Jul 2021) Shenzhen Municipal People's Congress consultation (in Chinese) on the proposed Shenzhen Special Economic Zone AI Industry Promotion Regulations. The regulations are intended to introduce an ethical framework and governance principles for the city's AI sector and to support the fair, just and ethical use of AI products and services. Responses are due by 30 July 2021.
- (12 Jul 2021) Hong Kong Monetary Authority statement on developments in virtual banking and its requirements for ensuring virtual bank customers are adequately protected.
- (16 Jul 2021) Securities and Futures Commission (SFC) statement on unregulated virtual asset platforms, in which it joins the regulatory authorities of the Cayman Islands, Italy, Japan, Lithuania, Poland, Thailand and the UK in warning consumers that the cryptoasset exchange Binance is not authorised to conduct business in its jurisdiction. More widely, the SFC emphasises that if stock tokens are deemed 'securities', then the marketing and/or distribution of them in Hong Kong or to Hong Kong investors constitutes a 'regulated activity' and requires a licence from the SFC.
- (22 Jul 2021) Speech from the Deputy Governor of the Reserve Bank of India, Shri T Rabi Sankar, on the benefits of launching an Indian CBDC and its potential interaction with the existing banking system, monetary policy and the legal framework.
- (22 Jul 2021) Speech from the Governor of the Central Bank of the Philippines, Benjamin Diokno, which provides an update on the Bank's recent work regarding digitalisation and innovation.
Republic of Korea:
- (22 Jul 2021) Financial Services Commission (FSC) statement (in Korean) announcing that any crypto-exchanges located in the Republic of Korea or operating in Korean markets (which includes any exchanges that are marketed towards Korean citizens, support KRW payments, or use the Korean language) must register with the FSC by 24 September 2021 or face fines or imprisonment.
- (14 Jul 2021) Report from the Personal Data Protection Commission and the Infocomm Media Development Authority on their work to develop a minimum viable product for an AI governance framework, which is intended to allow AI system owners and developers to test the performance of their solutions against accepted AI ethical and governance principles. | Press release
- (20 Jul 2021) EU Commission statement setting out a package of legislative proposals intended to strengthen the EU's anti-money laundering and counter terrorism financing (AML/CFT) rules. Among other things, the package includes proposals to expand the scope of EU AML/CFT rules to cover the entire crypto sector, which will include requiring cryptoasset transfers of over EUR 1,000 to be fully traceable and prohibiting anonymous cryptoasset wallets.
- (20 Jul 2021) EU Commission consultation on its roadmap for updating EU company law for the digital age, including proposals to make company data and information more accessible and usable in a cross-border context. Responses are due by 17 August 2021.
- (15 Jul 2021) Consultation (in German) by Deutsche Bundesbank and the Federal Financial Services Supervisory Authority (BaFin) on machine learning in risk models. In particular, the consultation seeks feedback from potential developers and users of machine learning methods on the hurdles to adoption and how they might be addressed. Responses are due by 30 September 2021.
- (17 Jul 2021) Legislative Decree 100/2021 (in Italian), which implements certain provisions of the Growth Decree, has entered into force. In particular, the decree sets out the regulatory framework for Italy's new fintech sandbox and establishes a fintech committee. The Italian supervisory authorities intend to publish details about the admission process for the sandbox by September 2021. | Press release (in Italian).
- (16 Jul 2021) Bank of Lithuania statement on unregulated cryptoasset service providers, in which it joins the regulatory authorities of the Cayman Islands, Hong Kong, Italy, Japan, Poland, Thailand and the UK in warning consumers that the cryptoasset exchange Binance is not authorised to conduct business in its jurisdiction.
- (12 Jul 2021) Commission de Surveillance du Secteur Financier circular (in French), which implements ESMA's guidelines on outsourcing to cloud service providers into the laws of Luxembourg. The circular will enter into force on 31 July 2021.
- (19 Jul 2021) Central Bank of Russia letter (in Russian) calling on Russian stock exchanges to avoid listing crypto-derivatives, crypto-funds or stocks issued by companies whose businesses rely on crypto-market prices. The letter also recommends that asset managers exclude crypto-related instruments in mutual funds.
- (22 Jul 2021) HM Treasury consultation on proposed changes to the Money Laundering Regulations, including amendments to implement the Financial Action Task Force's 'travel rule' for cryptoasset transfers. This would require cryptoasset exchange providers and custodian wallet providers to send and record certain information on transfers' originators and beneficiaries. Alongside this, the Treasury is also running a consultation on the functioning and effectiveness of the wider UK AML/CFT regime, including its treatment of emerging technologies. Responses to both consultations are due by 14 October 2021. | Press release
- (22 Jul 2021) Department of Business, Energy and Industrial Strategy report setting out the Government's strategic goals for establishing an innovation-led economy. The strategy identifies the following seven technology families, which will be prioritised for support and development: advanced materials and manufacturing; AI, digital and advanced computing; bioinformatics and genomics; engineering biology; electronics, photonics and quantum; energy and environment technologies; and robotics and smart machines. | Press release
- (20 Jul 2021) Consultation from the Department of Digital, Culture, Media and Sport (DCMS) on the objectives and powers of the Competition and Markets Authority's Digital Markets Unit (a non-statutory watchdog for competition in the digital markets), and a proposed new mandatory code of conduct for tech platforms, designed to uphold fair trading, open choices, trust and transparency. Responses are due by 1 October 2021. | Press release
- (20 Jul 2021) Information Commissioner's Office (ICO) toolkit for AI and data protection risk, which contains risk statements and best practice guidance intended to help organisations which use AI to process personal data to mitigate risks and demonstrate compliance with data protection laws. This toolkit is a beta version, following the launch of the alpha version in March 2021. The ICO intends to publish a final version in December 2021. | Press release
- (20 Jul 2021) The Financial Conduct Authority has announced the launch of its latest TechSprint, which will run in October 2021 and is seeking innovative solutions and proofs of concept for challenges faced by regulators in the area of environment, social and governance data and disclosure | TechSprint webpage
- (19 Jul 2021) DCMS consultation on proposals for a governance system to oversee digital identity and ensure organisations comply with the relevant rules, and the processes by which the legal validity of digital identities can be established and checked. Responses are due by 13 September 2021.
- (6 Jul 2021) DCMS policy paper setting out its intended approach to regulating digital technologies now that the UK has left the EU. The paper focuses on the objectives of promoting competition and innovation, protecting consumers and businesses, and upholding fundamental democratic rights and freedoms.
- (21 Jul 2021) Ministry of Digital Transformation report (in Ukrainian), setting out its recommendations for the steps the Government should take to develop the country's virtual assets sector. These include providing an appropriate legal framework, issuing a CBDC and allowing firms offering crypto-related services to open bank accounts. | Press release (in Ukrainian)
Clifford Chance Events
FTAHK X Clifford Chance – The Journey of Building a Successful Digital Bank (27 July 2021):
Are you interested in the development of digital banks and their transformation of the current banking system? Clifford Chance, in collaboration with the FinTech Association of Hong Kong (FTAHK), is bringing together senior executives of leading digital banks, Mox Bank and ZA Bank, to share their insights. The speakers will discuss the process and challenges of establishing a successful digital bank, as well as the impact their businesses are having on consumers' approach to banking services. | For more information and to register, please see the event page
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The content above relating to the People's Republic of China (PRC) is based on our experience as international counsel representing clients in business activities in the PRC and should not be construed as constituting a legal opinion on the application of PRC law. As is the case for all international law firms with offices in the PRC, whilst we are authorised to provide information concerning the effect of the Chinese legal environment, we are not permitted to engage in Chinese legal affairs. Our employees who have PRC legal professional qualification certificates are currently not PRC practising lawyers.