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In this regular post, we round-up FinTech-related financial services regulatory developments for the week ending 2 February 2024.
FCA research note: Review of maximal extractable value and blockchain oracles
The FCA has published a note presenting emerging technology research, jointly carried out by the Emerging Technology Research Hub and Wholesale Cryptoasset Policy at the FCA, which explores unique behaviours and mechanisms that are present in blockchain ecosystems.
The FCA has produced this research note to support ongoing efforts to proactively assess where new technology may pose both unique risks and opportunities to consumers and markets. The findings of this research will help to inform the FCA thinking about a regulatory regime for the activities that HM Treasury (HMT) has confirmed it plans to bring within the FCA’s perimeter, as set out in HMT’s Feedback Statement on the Future Financial Services Regulatory Regime for Cryptoassets.
This research note does not reflect policy views or a formal FCA position. [2 Feb 2024]
#Crypto #Blockchain
BoE paper: Customer data access and fintech entry – early evidence from open banking
The Bank of England (BoE) has published a staff working paper which explores the causes and consequences of government policies to promote open banking (OB).
The paper first assembles a dataset of government policies to promote OB, covering the 168 largest countries. It then provide some early evidence on the effects of OB policies on fintech entry, consumers, and small and medium enterprises (SMEs). Finally, it provides and calibrates a quantitative modelling framework for customer data sharing, which measures the overall and distributional effects of OB.
Staff working papers describe research in progress by the author(s) and are published to elicit comments and further debate. Any views expressed are solely those of the author(s) and do not represent the views of the BoE. [2 Feb 2024]
ESMA has published new questions and answers (Q&As) in relation the Markets in Crypto Assets Regulation (MiCAR) covering:
#MiCAR #CASP #Crypto #ARTs #EMTs
ESAs: Report on 2023 stocktaking of BigTech direct financial services provision in the EU
The European Supervisory Authorities (EBA, EIOPA and ESMA – the ESAs) have published a report which sets out the results of a stocktake of BigTech direct financial services provision in the EU.
The stocktake showed that BigTech subsidiary companies currently licensed to provide financial services pursuant to EU law mainly provide services in the payments, e-money and insurance sectors and, in limited cases, the banking sector. However, the ESAs have yet to observe their presence in the market for securities services.
To further strengthen the cross-sectoral mapping of BigTechs’ presence and relevance to the EU’s financial sector, the ESAs propose to set-up a data mapping tool within the European Forum for Innovation Facilitators (EFIF). This tool is intended to provide a framework that supervisors from the national competent authorities (NCAs) would be able to use to monitor on an ongoing and dynamic basis the BigTech companies’ direct and indirect relevance to the EU financial sector. [1 Feb 2024]
The European Securities and Markets Authority (ESMA) has published its January 2024 trends, risks and vulnerabilities (TRV) report. The report discusses the key risk drivers of, among other things, social media-driven investments.
It also provides a market update on various areas, including financial innovation, noting that cryptoasset valuations rebounded in 2023.
EBA: Chair discusses 2024 focus areas for digital finance
The European Banking Authority (EBA) has published a speech by its Chair, José Manuel Campa, on confidence and resilience as a foundation of well-functioning financial markets with respect to digital finance, delivered at Afore Consulting’s Eighth Annual Fintech and Regulation Conference. Highlights of the speech included:
#DORA #MiCAR #Crypto #DLT #AI #MachineLearning
ESMA: CPs – reverse solicitation exemption and classification of cryptoassets under MiCAR
The European Securities and Markets Authority (ESMA) has issued two consultation papers (CPs) on the draft guidelines under the Markets in Cryptoassets Regulation (MiCAR).
The CP on reverse solicitation proposes guidance relating to the conditions of application of the reverse solicitation exemption and the supervision practices that national competent authorities (NCAs) may take to prevent its circumvention.
The CP on classification of cryptoassets as financial instruments proposes guidelines aimed at providing NCAs and market participants with structured but flexible conditions and criteria to determine whether a cryptoasset can be classified as a financial instrument. The guidelines aim to bridge MiCAR and the Markets in Financial Instruments Directive II (MiFID II) to ensure consistency across the EU.
Responses are requested by 29 April 2024. ESMA will consider the feedback it receives to the consultation in Q2 2024 and expects to publish a final report in Q4 2024. [29 Jan 2024]
The Australian Prudential Regulation Authority (APRA) has published its supervision and policy priorities for the first six months of 2024. APRA’s letter outlines its regulatory agenda across banking, superannuation and insurance. Among the major cross-industry issues is a focus on cyber security, ‘reflecting the growing reliance on digital technologies by entities and the community’. [31 Jan 2024]
#Cyber
HKMA deputy chief executive delivers presentation on Hong Kong banking sector 2023 year-end review and priorities for 2024
The HKMA’s Deputy Chief Executive, Mr Arthur Yuen, has delivered a presentation on the HKMA’s 2023 year-end review and priorities for 2024 for the Hong Kong banking sector.
Looking ahead, in 2024, the HKMA’s priorities include, among other things:
#Cyber #Fraud #AI
HKMA delegation visits Thailand to strengthen bilateral financial collaboration
The HKMA has announced the conclusion of its three-day visit to Thailand to strengthen bilateral co-operation between the Hong Kong and Thailand financial sectors.
The visit was part of the HKMA’s effort to broaden and deepen overseas network. The HKMA visited Saudi Arabia and the United Arab Emirates last year, and plan to continue its engagement with the Middle East and also visit other Association of Southeast Asian Nations (ASEAN) countries in 2024.
#Payments
HKMA publishes presentation materials for upcoming briefing to LegCo Panel on Financial Affairs on 5 February 2024
The HKMA has published presentation materials for its briefing to the Legislative Council (LegCo) Panel on Financial Affairs, which took place on 5 February 2024. The materials included, among other things, information on the following areas:
RBI: Leveraging technology to streamline the internal compliance monitoring function
The RBI has published a letter addressed to the Chairs, Managing Directors and CEOs of banks and other firms regarding the use of technology in internal compliance monitoring.The letter sets out RBI’s observations following its assessment in select Supervised Entities (SEs). Noting that automation of the compliance monitoring process in SEs remains a work in progress with various aspects being carried out with significant manual intervention, the letter emphasises the importance of implementing comprehensive, integrated, enterprise-wide and workflow-based solutions and tools to enhance effectiveness.
Regulated entities are expected to carry out a review of their existing internal compliance tracking and monitoring processes, and to make any changes or implement new systems by end June 2024. [31 Jan 2024]
The Reserve Bank of India (RBI) has announced the latest results of its RBI-Digital Payments Index (RBI-DPI), which has been in operation since 2021 and captures the extent of digitisation of payments across the country. The index for September 2023 stands at 418.77 and has increased across all parameters, driven by growth in payment enablers, payment performance and consumer centricity across the country over the period. [31 Jan 2023]
#Payments
RBI: Deputy Governor discusses emerging technologies
The RBI has published the keynote address by its Deputy Governor, Michael Debabrata Patra, delivered at the SAARCFINANCE seminar on Emerging Digital Technologies in Central Banking and Finance. In his speech, the Deputy Governor discussed the state of play of technologies such as application programming interfaces (APIs), artificial intelligence (AI) and machine learning (ML), among others. He noted how new technologies help to extract insights from data, which inform policy formulation and helps to reduce compliance costs. Emerging technologies are also helping to design new products and services, not least central bank digital currencies (CBDCs).
The speech also discussed emerging technologies in the context of the global and Indian experience, and the challenges that technology presents, including for cybersecurity. [29 Jan 2024]
Bangko Sentral ng Pilipinas (BSP) has published a summary of its 2023 Cashless Expo, held on 17-19 November 2023. The event brought micro, small, and medium enterprise exhibitors and buyers together in an effort to promote digital payments, such as through QR Ph, the Philippine standard for QR technology. [30 Jan 2024]
#Payments #QR
SEC charges founder of $1.7bn crypto pyramid scheme and top promoter with fraud
The Securities and Exchange Commission (SEC) has charged two individuals for their involvement in a $1.7 billion cryptocurrency pyramid scheme. The criminal complaint, filed with the U.S. District Court for the District of Maryland, alleges that the two individuals promised investors cryptoasset mining returns and associations with Fortune 500 companies from June of 2020 to early 2022, but that there were no sources of revenue for the operation beyond initial investor contributions. It is further alleged that the scheme collapsed and came to light when investors were no longer able to make withdrawals from their accounts. The complaint charges the individuals with violations of anti-fraud and registration provisions of federal securities laws and seeks injunctive relief, civil penalties, and disgorgement of profits. [29 Jan 2024]
#Crypto
