FinTech Global Regulatory Round-up – w/e 11 June 2021

BIS: Results from survey of central banks on CBDCs

BIS has published a paper entitled "CBDCs beyond borders: results from a survey of central banks", which is based on a survey of 50 central banks in the first quarter of 2021 regarding the cross-border use of CBDCs. The survey responses show that although most central banks have yet to take a firm decision on issuing and CBDC, a tentative inclination towards allowing use of a future CBDC by tourists and other non-residents domestically can be seen. [11 Jun 2021]

BCBS: Consultation on prudential treatment of cryptoasset exposures

The Basel Committee on Banking Supervision (BCBS) has published a consultative document on the prudential treatment of cryptoasset exposures. The BCBS proposes to split cryptoassets into two broad groups: those eligible for treatment under the existing Basel Framework with some modifications; and others, such as bitcoin, to be subject to a new conservative prudential treatment. Central bank digital currencies are not within the scope of the consultation.

Feedback is requested by 10 September 2021. [10 Jun 2021]

#CryptoassetExposures

BCBS discusses effects of Covid-19 on banks, assesses post-Covid-19 reforms, and agrees public consultation on cryptoassets

The Basel Committee on Banking Supervision (BCBS) has issued a press release which sets out various points discussed at its meeting on 4 June 2021. Among other things, the BCBS:

• discusses the Covid-19 risks to banking systems;
• reviews provisioning practices and stresses the importance of using capital and liquidity buffers;
• reviews the interim report evaluating the impact of the Basel framework during Covid-19; and
• agrees to hold a public consultation on the prudential treatment of cryptoasset exposures (consultation paper expected to be published this week). [7 Jun 2021]

#CryptoassetExposures

BoE and BIS launch Innovation Hub London Centre

The Bank of England (BoE) and the Bank for International Settlements (BIS) have launched the BIS Innovation Hub London Centre. The London centre will help advance Innovation Hub's work on priority themes, including the use of suptech and regtech; next generation financial market infrastructures; central bank digital currencies (CBDCs); open finance; cyber security; and green finance.  [11 Jun 2021]

#RegTech

#CBDCs

#OpenFinance

FCA: 7th cohort of regulatory sandbox

The FCA has published a new webpage covering the 7th cohort of the regulatory sandbox. From 58 applications, the FCA accepted 13 firms for the latest cohort. The new page also provides an update on the Global Financial Innovation Network (GFIN) and the FCA's Digital Sandbox pilot. Finally, the FCA notes that while the regulatory sandbox is currently run on a cohort basis, the regulator intends to move to 'always open' later in 2021.  [10 Jun 2021]

#RegulatorySandbox

BoE: Speech on stablecoins

The Bank of England (BoE) has published a speech on stablecoins, delivered by Christina Segal-Knowles, Executive Director, Financial Market Infrastructure Directorate. Among other things, Ms Segal-Knowles spoke about the potential benefits of stablecoins and other new forms of innovation in payments, whilst highlighting that any such new forms of digital money must be made safe through regulation in order for such benefits to be realised. [10 Jun 2021]

#DigitalMoney

#Stablecoins

PSR: Consultation on five-year strategy

The Payment Systems Regulator (PSR) has published a consultation paper (and accompanying factsheet) on its new proposed five-year strategy. The paper sets out outcomes the PSR would like to see in payments, the PSR's four key priorities for the upcoming period, and how the PSR will measure whether it is achieving its strategic priorities.

Feedback is requested by 10 September 2021. Stakeholder webinars will be held on 23 June and 30 June 2021. [10 Jun 2021]

#Tech

#OpenBanking

BoE: Discussion Paper on new forms of digital money; summary of responses to 2020 Discussion Paper on CBDC

The Bank of England (BoE) has published a Discussion Paper on new forms of digital money which considers the following:

• the role of money in the economy;
• public policy objectives in light of the challenges and opportunities presented by systemic stablecoins;
• an illustrative scenario for the modelled demand for new forms of digital money;
• the implications for macroeconomic stability arising from new forms of digital money; and
• the existing and needed regulatory environment.

Feedback to the Discussion Paper is requested by 7 September 2021.

The BoE has also published a summary of responses to its March 2020 Discussion Paper 'Central Bank Digital Currency (CBDC): opportunities, challenges and design'. Respondents showed strong agreement that the BoE should be carefully studying CBDC, although there was a range of views on whether a CBDC was ultimately likely to be needed or desirable. The BoE has identified five core principles from the responses which will guide its future exploration of CBDC:

• financial inclusion as a prominent consideration in the design of any CBDC;
• a competitive CBDC ecosystem;
• the need for assessing whether non-CBDC payment innovations could deliver the same benefits;
• the importance of the protection of CBDC users' privacy;
• the impact of the CBDC on the BoE's ability to meet monetary and financial stability, and the requirement that the CBDC should 'do no harm'. [7 Jun 2021]

#CBDCs

HMT: G7 Finance Ministers & Central Bank Governors Communiqué

HM Treasury (HMT) has published the G7 Finance Ministers & Central Bank Governors Communiqué, which sets out agreed concrete actions intended to address today's historic challenges and as part of a renewed and urgent effort towards deeper multilateral economic cooperation. Agreed actions include those relating to ongoing efforts to tackle climate change and biodiversity loss as well as innovations in digital money and payments. [7 Jun 2021]

#Payments

EBA: Report on data provided by PSPs on readiness to apply SCA for e-commerce card-based payment transactions

The European Banking Authority (EBA) has published a report on the data provided by payment service providers (PSPs) on their readiness to apply strong customer authentication (SCA) for e-commerce card-based payment transactions. The report highlights the status of issuing and acquiring PSPs in enrolling online merchants, payment cards and payment service users (PSUs) into SCA-compliant solutions, and in requesting SCA for online payment transactions after 31 December 2020, when the SCA migration period ended.  [11 Jun 2021]

HKMA announces new "Fintech 2025" strategy

The HKMA has announced its new "Fintech 2025" strategy for Hong Kong, consisting of five focus areas:

• All banks go fintech – Following on from the "Smart Banking Era" strategy announced in 2017, the HKMA will continue to promote the comprehensive adoption of fintech by Hong Kong banks and encourage them to fully digitalise their front-end and back-end operations.  The HKMA will launch a Tech Baseline Assessment to take stock of banks' current and planned adoption of fintech and to identify areas which are currently underdeveloped and may benefit from HKMA support.  The HKMA will issue further supervisory guidance and will invite banks to submit a three-year plan for technology adoption within the fourth quarter of 2021.
• Future-proofing Hong Kong for central bank digital currencies (CBDCs) – The HKMA will enhance its research work on issuing CBDCs at both wholesale and retail levels.  The HKMA has been collaborating with the Bank for International Settlements Innovation Hub Hong Kong Centre to research retail CBCDs and will shortly begin a study on the technical, policy and legal issues relating to e-HKD (with the aim of offering its initial thoughts in 12 months' time).  To facilitate cross-boundary payments between Hong Kong and Mainland residents, the HKMA will continue to work with the People’s Bank of China on the technical testing of e-CNY in Hong Kong.
• Creating next-generation data infrastructure – The HKMA will take the lead in enhancing and building new data infrastructure, including the Commercial Data Interchange, digital corporate identity, and DLT-based credit data sharing platform.
• Expanding the fintech-savvy workforce – The HKMA will collaborate with different strategic partners to increase the supply of fintech talent through developing fintech-specific training programmes and qualifications, and promoting joint projects between the industry and the academia.
• Nurturing the ecosystem with funding and policies – The HKMA will establish a Fintech Cross-Agency Co-ordination Group with various industry key players to formulate supportive policies.  It will also enhance its Fintech Supervisory Sandbox and continue to prepare for the Hong Kong Growth Portfolio.

Further details can be found in a recent speech and media briefing by Mr Eddie Yue (Chief Executive of the HKMA) and a speech by Mr Christopher Hui (Secretary for Financial Services and the Treasury).  [7 & 8 Jun 2021]

#CBDCs

#Data

#Sandbox

BNM consultation: E-Money exposure draft

The Bank Negara Malaysia (BNM) has released an exposure draft setting out the proposed requirements and guidance for issuers of electronic money (e-money) approved pursuant to section 11 of the Financial Services Act, 2013 or the Islamic Financial Services Act, 2013.

Feedback on the draft is requested by 31 July 2021.  [11 Jun 2021]

DoJ Seizes $2.3 Million in Cryptocurrency Paid to Ransomware Extortionists

The Department of Justice (DoJ) announced that it seized 63.7 bitcoins currently valued at approximately $2.3 million. These funds allegedly represent the proceeds of a ransom payment of 8 May to individuals in a criminal group, which had targeted Colonial Pipeline, resulting in critical infrastructure being taken out of operation. The seizure warrant was authorized the same day by the Honorable Laurel Beeler, US Magistrate Judge for the Northern District of California. [7 Jun 2021]

#Bitcoin

DoJ Announces that a Latvian National Was Charged for Her Alleged Role in a Transnational Cybercrime Organization

A Latvian national was arraigned in federal court in Cleveland, Ohio, on multiple charges stemming from her alleged role in a transnational cybercrime organization responsible for creating and deploying a computer banking trojan and ransomware suite of malware known as “Trickbot.”

The defendant is charged in 19 counts of a 47-count indictment, which accuses her of participating in a criminal organization, which deployed the Trickbot malware. The criminal organization operated in Russia, Belarus, Ukraine, and Suriname, and primarily targeted victim computers belonging to businesses, entities, and individuals, including those in the Northern District of Ohio and elsewhere in the United States. Targets included hospitals, schools, public utilities, and governments. The defendant, who previously resided in Paramaribo, Suriname, was arrested on Feb. 6, in Miami, Florida. [4 Jun 2021]

#Malware

#Trickbot