FinTech Global Regulatory Round-up – w/e 12 March 2021

HM Land Registry has launched its Digital Identity Standard. The Standard provides a step-by-step list of requirements for conveyancers’ use of digital services to verify their client’s identity securely and conveniently online. The new standard is optional. However, it offers a ‘Safe Harbour’ for those conveyancers who meet the requirements.

The Standard is intended to make identity verification more convenient, without the need to meet physically, for all clients whether residential or commercial. It requires the use of smartphones to extract encrypted information contained within the chips of documents such as passports. [12 Mar 2021]

#Innovation

In a joint press release, the Department of Culture, Media and Sport (DCMS), Department for Business, Energy and Industrial Strategy (BEIS) and the Office for Artificial Intelligence (OAI) announced plans to issue a National AI Strategy in 2021. [12 Mar 2021]

The Bank of England has published the minutes of the AI Public-Private Forum meeting held on 26 February 2021. A representative of the Information Commissioner's Office (ICO) was welcomed as an observer at the Forum, and attendees engaged in a roundtable discussion of key issues and challenges associated with data quality; data strategy and economics; data governance, ethics and culture. [10 Mar 2021]

The Digital Regulation Cooperation Forum (DRCF) has published its first annual plan of work, which outlines the DRCF's priorities for the coming year and sets out a roadmap for how the Office of Communications (Ofcom), the Competition and Markets Authority (CMA), and the ICO will increase the scope and scale of their co-operation to work together on online regulatory matters. The FCA will formally join the DRCF from April 2021. [10 Mar 2021]

#Innovation

The UK Judiciary has published a speech on the technological challenges for English law and jurisdiction delivered by Sir Geoffrey Vos, Master of the Rolls, at the International Swaps and Derivatives Association (ISDA) annual legal forum. Amongst other things, Sir Geoffrey spoke about the status of cryptoassets and smart contracts; digital dispute resolution rules; digitisation of commercial records; and AI. [10 Mar 2021]

#SmartContracts

#AI

The European Parliament (EP) has published the response given by the European Commission (EC) to a question tabled by MEPs regarding the objectives of the digital euro and the approach to data collected on digital euro transactions. The response advises that the consultation exercise conducted by European Central Bank (ECB) at the end of 2020 registered significant interest, and that the EC and ECB will jointly review at technical level a broad range of policy, legal and technical questions emerging from a possible introduction of a digital euro, taking into account their respective mandates. [12 Mar 2021]

The Committee on Economic and Monetary Affairs (ECON) of the EP has published a draft report on on the proposal for a regulation on a pilot regime for market infrastructures based on distributed ledger technology (DLT). The proposed regulation is intended to provide a mechanism for allowing market infrastructures to experiment with certain restricted uses of DLT. The report indicates overall support for the proposed regulation, but presents a number of amendments aimed at ensuring the final proposal delivers the stated objectives of the pilot programme. [12 Mar 2021]

The ECB has published a transcript of the interview which Andrea Enria, Chair of the Supervisory Board of the ECB, gave to ORF. At the end of the interview, Mr Enria comments on cryptocurrencies/cryptoassets; he observes that cryptoassets do not generate a risk for financial stability, but highlights investor protection concerns. Mr Enria says, "We have seen investors losing money in these types of investments. So it's important that banks are very cautious in the way in which they engage with these assets and the way in which they maybe distribute these products to their customers, which we strongly discourage."  [12 Mar 2021]

The EC has published a roadmap, in the form of an inception impact assessment, on instant payments. The impact assessment to follow will investigate whether:

• new legislation is needed in this field;
• non-legislative measures would be appropriate; or
• other policy options are suitable.

Feedback is request by 7 April 2021. [11 Mar 2021]

The EC has listed two new events on its digital finance outreach webpage:

• On 23 March 2021, an introduction to open finance; and
• On 25 March 2021, open insurance.  [10 Mar 2021]

#OpenInsurance

The European Banking Authority (EBA) has published its Consumer Trends Report for 2020/2021. The Report identifies topical issues including irresponsible lending, creditworthiness assessments, and digitalisation, which the EBA has very recently addressed, as well as others, such as selling practices and access to bank account, which it has recently started to work on. The Report also explains the measures the EBA has taken to mitigate the impact of Covid-19 on consumers.

With regard to payment services, the EBA reports that payment cards continue to be the most widely used payment instrument in the EU. The Report observes an increase in the use of contactless payments as a result of Covid-19, which the EBA facilitated by calling on payment services providers to facilitate contactless payments, including by increasing the limit closer to the EUR50 threshold allowed under EU law.  [10 Mar 2021]

#Payments

#Contactless

ECON has published its draft Report on the proposal for a regulation of the European Parliament and of the Council on markets in crypto-assets and amending the Whistleblower Protection Directive.

The draft Report sets out amendments to ensure that:

• crypto-asset service providers have in place internal control mechanisms and effective procedures for full traceability of all crypto-asset transfers;
• crypto-asset service providers have in place a plan to support an orderly wind-down of their activities under applicable national law; and
• anti-money laundering (AML) and anti-terrorist financing (ATF) remain a key concern when dealing with crypto-assets. [9 Mar 2021]

#AML/ATF

The ASIC Deputy Chair Karen Chester has addressed the Australian Financial Review Business Summit on ASIC’s governance in 2020 and responses to the pandemic-induced trifecta of shocks to the economy, health and social well-being. Ms Chester canvassed a range of topics including:

• potential harms on ASIC’s radar, including consumer harm and cyber risk;
• ASIC’s cyber strategy; and
• ASIC’s ongoing pilot projects, including in relation to enforcement, product design and distribution, and superannuation. [10 Mar 2021]

The Financial Industry Regulatory Authority (FINRA) has announced a new podcast on cybersecurity and the recent shift to the cybersecurity landscape as a result of remote working. [9 Mar 2021]

The DOJ has announced that an individual has pleaded guilty to securities fraud, wire fraud, and money laundering charges that defrauded more than 3,500 victims of more than $16 million. The individual and their company used a website to make fraudulent representations and convince victims to send funds using a virtual currency exchange. It was alleged that the individual used multiple websites to make false communications to potential investors in order to secure funds. The individual also directed their victims to make investments using virtual currencies, such as Bitcoin. During the same period, the individual and their company used deceptive devices to sell securities and then tried to conceal the proceeds of the wire fraud and securities fraud. The individual is facing a maximum sentence of 20 years in prison and a maximum $250,000 fine for the wire fraud and securities fraud charges, and 20 years in prison and a $500,000 maximum fine for the money laundering charge. In addition, the court also may order an additional term of supervised release, fines or other assessments, and restitution, if appropriate. [4 Mar 2021]

The New York State Department of Financial Services (NYDFS) has granted a charter under New York Banking Law to a company to operate as a limited liability trust company. The limited liability trust company is authorized to provide digital asset custody and other related services to New York customers, including NYDFS-supervised entities authorized to engage in virtual currency activity. The NYDFS has approved 28 charters and licenses, including this one, for companies engaged in virtual currency business activity. [4 Mar 2021]

The NYDFS has announced today that a mortgage lender will pay a $1.5 million penalty to New York State for violations of the Cybersecurity Regulation. The mortgage lender failed to report a cyber-breach exposing New York residents' private data. As part of the settlement, the mortgage lender has agreed to the penalty and has commenced further improvements to its existing cybersecurity program, ensuring that its cybersecurity controls are fully compliant with the Cybersecurity Regulation. [3 Mar 2021]