In this regular update, we round-up FinTech-related regulatory developments for the week ending 11 December 2020.
|GLEIF announces extension of Global LEI System
The Global Legal Entity Identifier Foundation (GLEIF) has announced it will extend the Global Legal Entity Identifier (LEI) System to create a fully digitised LEI service capable of enabling instant and automated identity verification globally between counterparties across industry sectors. [10 Dec 2020]
|BIS CGIDE Report: Enabling open finance through APIs
The Bank for International Settlements (BIS) has published report prepared by the Consultative Group on Innovation and the Digital Economy (CGIDE) on enabling open finance through APIs.
This is the first project undertaken by the CGIDE. It looks at technical issues surrounding the development of an identification and authentication API that could be used to implement privately and publicly administered open finance solutions with seamless scalability. In particular, it analyses an API architecture based on an authentication app for mobile phones developed and maintained by a central validator.
Comments on the report are requested by 31 January 2021. [8 Dec 2020]
|IMF Speech on Cyber Security and Financial Inclusion
The International Monetary Fund (IMF) has published the remarks of Kristalina Georgieva , IMF Managing Director at the (Virtual) Conference on Financial Inclusion and Cybersecurity, co-hosted by the IMF, Carnegie Endowment for International Peace, World Bank, and the World Economic Forum (WEF). Ms Georgieva remarked that, ‘cyber threats can have a grave impact on financial stability… And in threatening financial stability, cyber attacks can also deny people the benefits of financial inclusion’. She identified digital financial inclusion as a top priority during recovery from Covid. [10 Dec 2020]
|IMF staff discussion note: Cyber risk and financial stability
The IMF has published a staff discussion note which examines the link between cyber risk and financial stability. [7 Dec 2020]
|DIT: UK signs trade deals with Singapore and Vietnam
The Department for International Trade (DIT) has announced that the UK has signed continuity trade deals with Singapore and Vietnam. In particular, DIT highlights that the UK-Singapore deal secures benefits for UK financial technology (FinTech) firms, as Singapore has agreed to launch a review in 2021 to consider an increase in the limits imposed on e-wallet payments, which affect UK firms operating in Singapore; and discuss opportunities for UK firms to apply to become Digital Wholesale Banks in Singapore. This is in addition to additional customer services points permitted for UK retail banks already operating in Singapore as part of this agreement.
UK International Trade Secretary Liz Truss and Chan Chun Sing, Singaporean Minister for Trade and Industry, have also announced their intention to launch negotiations for a Digital Economy Agreement (DEA).
The UK-Singapore and UK-Vietnam joint statements have been published. [11 Dec 2020]
|HMT: UK and Brazil joint statement on financial services, taxation, sustainable growth and Green Finance
HM Treasury (HMT) has published a joint statement by UK Chancellor Rishi Sunak and the Brazilian Economy Minister Paulo Guedes from the fourth UK-Brazil Economic and Financial Dialogue (EFD). The ministers agreed a number of measures, including a commitment to enhance collaboration on asset management, fintech and Open Banking
Senior officials will meet to take stock in H1 2021, and the next EFD will be held in Brazil in 2021. [11 Dec 2020]
|EPC: 2020 report on payment threats and fraud trends
The European Payments Council (EPC) has published its 2020 annual report on payment threats and fraud trends. It provides an overview of, and suggested controls and mitigations for, the most important threats and ‘fraud enablers’ in the payments landscape, including social engineering and phishing, malware, Advanced Persistent Threats (APTs), (Distributed) Denial of Service ((D)DoS), botnets and monetisation channels. [7 Dec 2020]
|EU Commission: Speech on impact of IFR and way forward
The European Commission has published a speech by Executive Vice-President, Margrethe Vestager on the impact of the Interchange Fee Regulation (IFR) and payments evolution.In her assessment of the five years that the IFR has been in place, Ms Vestager concluded that: ‘capping fees has meant that the charges merchants face for card payments have gone down. Over time, this will lead to benefits for consumers. These will be lower prices, but also more choice and convenience because lower fees make it easier for merchants to accept different types of cards’. She then moved on to discuss developments in the payments landscape, highlighting the role of Big Data, the development of new payments solutions, and new FinTech and BigTech market entrants. Ms Vestager said that the Commission will safeguard the single market principles of fair competition, transparency and rule of law in enforcement, openness, and respect for rights and values. Ms Vestager said that the Commission’s actions in the payments space could be a combination of enforcement and further policy development. [7 Dec 2020]
|Council of Europe: Notice of meeting of working party on financial services
On 14 December, the Council of Europe working party on financial services will meet to discuss the Proposal for a Regulation of the European Parliament and of the Council on markets in crypto-assets (MICA). [7 Dec 2020]
|ESMA publishes 2020 ESEF XBRL taxonomy files and ESEF conformance suite
The European Securities and Markets Authority (ESMA) has published 2020 XBRL taxonomy files and an update to the Conformance Suite to facilitate implementation of the European Single Electronic Format (ESEF) Regulation. [7 Dec 2020]
|European Parliament: Note of FinTech Working Group meeting
The European Parliament has published a summary note of the 5th meeting of the FinTech Working Group which was held on 1 December 2020. The meeting focused on global stablecoins (GSCs); participants heard from Nouriel Roubini (Professor of Economics at New York University’s Stern School of Business), Jörg Kukies (State Secretary at the German Federal Ministry of Finance) and Stuart Levey (CEO of Diem – former Libra- Association).
|European Parliament Think Tank Briefing – Digital Markets Act
The European Parliament has published a briefing prepared by its Think Tank entitled, ‘Regulating digital gatekeepers: Background on the future of the digital markets act’. [8 Dec 2020]
|CORIE framework launched to test cyber resilience of Australia’s financial services industry
CFR has announced that it has released a Cyber Operational Resilience Intelligence-led Exercises (CORIE) framework to test and demonstrate the cyber maturity and resilience of institutions within the Australian financial services industry. The CORIE framework has been developed to aid in preparation and execution of industry-wide cyber resilience exercises. One of the main aims of the CORIE framework is to provide data and reporting to inform relevant Australian regulators of systemic weaknesses that may present a risk to the integrity and stability of Australian financial markets. The framework is also designed to identify actions to uplift the cyber resilience of financial institutions. This will be achieved by using exercises that mimic the tactics, techniques and procedures of real-life adversaries, creating and utilising tools, and using techniques that may not have been anticipated and planned for. [8 Dec 2020]
|SFC provides additional guidance on use of external electronic data storage
The SFC has published additional guidance in the form of frequently asked questions (FAQs) on the use of external electronic data storage, in response to feedback from licensed corporations (LCs) and other stakeholders.
These FAQs follow the SFC’s 31 October 2019 circular (see our earlier update) setting out requirements for using external electronic data storage providers (EDSPs) to exclusively keep records or documents required to be kept under the Securities and Futures Ordinance (SFO) or the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Regulatory Records).
The 2019 circular requires LCs exclusively storing their Regulatory Records with EDSPs to provide the SFC with either a signed undertaking from the EDSP (for non-Hong Kong based EDSPs) or a notice issued by the LC to the EDSP (for Hong Kong based EDSPs).
The latest FAQs provide that as an alternative to the undertaking from the EDSP, the SFC will accept an undertaking from each of the two managers-in-charge (MICs) appointed for the purposes of the 2019 circular or (with the consent of the SFC) one MIC or one responsible officer, substantially in the form of the template in Appendix 1 to the FAQs (PDF / Word versions), subject to various conditions set out in Q10 of the FAQs. LCs may also approach the SFC to propose or discuss other alternatives which may satisfy the SFC’s regulatory objectives and requirements.
Among other things, the FAQs also state that where any LC’s electronic Regulatory Records have been kept exclusively with an EDSP or an affiliate before the date of the FAQs (ie, 10 December 2020), without the SFC’s prior approval in writing under section 130 of the SFO, the LC should notify the SFC’s Licensing Department and apply for such approval as soon as practicable. The SFC has made consequential changes to its FAQs on premises for business and record keeping which discusses the approval required under section 130. [10 Dec 2020]
|SFC makes available materials from AML/CFT webinars
The SFC has made available the following materials from the anti-money laundering and counter-financing of terrorism (AML/CFT) webinars which took place earlier this month (see our earlier update regarding the dates, rundown and speakers for the webinars):
|Insurance Authority makes available materials from AML/CFT sharing session
The Insurance Authority has made available materials from an online sharing session on 4 December 2020 regarding key observations of insurers’ anti-money laundering and counter-financing of terrorism (AML/CFT) control on virtual customer onboarding.
The session was delivered by the Insurance Authority’s Market Conduct Division and covered the following topics (among others):
|HKMA Chief Executive publishes inSight article on fintech initiatives for cross-border payments
The HKMA has published an inSight article, “A new trend for fintech – cross-border payment” by its Chief Executive, Mr Eddie Yue.
Mr Yue notes that although domestic payment services around the world have become highly digitalised, development in cross-border payment is lagging behind, and the global community is still short of good solutions to address well-known issues such as long processing time, high cost and low transparency.
The HKMA has been progressing on this front with various initiatives (among others):
|MAS launches digital infrastructure to facilitate financial planning by Singaporeans
MAS has launched the Singapore Financial Data Exchange (SGFinDex). SGFinDex is the first public digital infrastructure to use a national digital identity and a centrally managed online consent system to enable individuals to access, through applications, their financial information held across different government agencies and with participating financial institutions.
In the next phase, individuals will be able to access information on their insurance policies and their stock holdings. [7 Dec 2020]
|Covid-19: Singapore and China expand financial cooperation to support recovery
MAS has announced several initiatives to enhance financial cooperation between Singapore and China. The measures will build on existing areas of collaboration and are intended to facilitate financing and investment activities in support of a post-Covid-19 recovery in Singapore and China.
The initiatives include:
|Covid-19: RBI announces relaxation of requirement of additional factor authentication for contactless transactions
The Reserve Bank of India (RBI) has announced that the per transaction limit for Additional Factor of Authentication for contactless card transactions will be increased to ₹ 5,000/-. The change shall come into effect from 1 January 2021. [4 Dec 2020]
|SEBI announces single login credential for e-voting
In an effort to increase retail and non-institutional participation, SEBI has announced the phased introduction of a single login credential for e-voting for demat account holders via their demat accounts/websites of depositories. [9 Dec 2020]
|New SEC rules to modernize key market infrastructure responsible for collecting, consolidating, and disseminating equity market data
The Securities and Exchange Commission (SEC) has adopted rules to modernize the infrastructure for the collection, consolidation, and dissemination of market data for exchange-listed national market system stocks (“NMS market data”). The rules will expand the content of NMS market data and replace the historical “exclusive SIP” model with a decentralized model of “competing consolidators”. [9 Dec 2020]
|CFTC approves Electronic Trading Risk Principles
The CFTC approved amendments to CFTC Regulation Part 38 to address the potential risk of a designated contract market’s (DCM) trading platform experiencing a market disruption or system anomaly due to electronic trading. The final rules set out three principles applicable to DCMs concerning:
and include acceptable practices, which provide that a DCM can comply with these principles by adopting and implementing rules and risk controls reasonably designed to prevent, detect, and mitigate market disruptions and system anomalies associated with electronic trading. [8 Dec 2020]
|Covid-19: Secretary Mnuchin hosts discussion with G7 Finance Ministers and Central Bank Governors
U.S. Treasury Secretary Steven T. Mnuchin hosted a discussion with Finance Ministers and Central Bank Governors from Canada, France, Germany, Italy, Japan, the United Kingdom, the European Commission, and the Eurogroup. The heads of the IMF, World Bank, and Financial Stability Board (FSB) also attended. The discussion covered:
|Fed Speech on Technology and the Regulatory Agenda for Community banking
Fed Governor Michelle Bowman gave a speech at the Independent Community Bankers of America ThinkTECH Policy Summit (virtual event) on 4 December discussing the quantum leap in the use of digital deposit, digital payments and online lending, and the importance of the adoption of digital banking services for historically underserved and disadvantaged communities. She referred to the Fed’s plans to:
|SEC specialized FinHub unit to become standalone office
The SEC announced that its Strategic Hub for Innovation and Financial Technology, commonly referred to as FinHub, will become a stand-alone office focused on innovation and financial technology. Valerie A. Szczepanik will continue to lead FinHub as its first director and will report directly to the SEC Chairman. Designating FinHub as a stand-alone office strengthens the SEC’s ability to continue fostering innovation in emerging technologies in its markets consistent with investor protection. The office will continue to lead the SEC’s work to identify and analyze emerging financial technologies affecting the future of the securities industry, and engage with market participants, as technologies develop. [3 Dec 2020]
Herbert Smith Freehills LLP has a Formal Law Alliance (FLA) with Singapore law firm Prolegis LLC, which provides clients with access to Singapore law advice from Prolegis. The FLA in the name of Herbert Smith Freehills Prolegis allows the two firms to deliver a complementary and seamless legal service.