FinTech Global FS Regulatory Round-up – w/e 3 March 2023

IMF: Paper on a digital marketplace to improve cross-border payments

The International Monetary Fund (IMF) has published Trust Bridges and Money Lows: A Digital Marketplace to Improve Cross-Border Payments. The paper considers different payment arrangements in terms of the implied trust structures. It discusses how the tokenization of money alters trust links and allows for a potentially more efficient market structure to exchange money. The paper ends with a suggested global marketplace to trade tokenized money directly across borders.

#Payments

CPMI: Consultative report on ISO 20022 harmonisation requirements

The Committee on Payments and Market Infrastructures (CPMI) has published, for public consultation, a report setting out the proposed ISO 20022 harmonisation requirements for cross-border payments. The harmonisation requirements would complement existing market practice guidance by providing high-level requirements to be adopted into the various international and local usage guidelines. The proposed 2025 introduction of the requirements would align with SWIFT’s decision to remove the ability to send cross-border message text (MT) payment messages over its network.

Feedback is requested by 10 May 2023. The final report will be delivered to the Indian G20 Presidency by end-2023. The CPMI proposes that payment system operators and participants begin preparations to align their ISO 20022 usage guidelines with the finalised CPMI requirements to be effective in November 2025. [1 Mar 2023]

TSC: Oral evidence - crypto-asset industry

The TSC has published the transcript of its oral evidence with the Bank of England (BoE) on the crypto-asset industry. The TSC heard from: Sarah Breeden, Executive Director, Financial Stability Strategy and Risk; Sir Jon Cunliffe, Deputy Governor for Financial Stability; and Sasha Mills, Executive Director, Financial Market Infrastructure. [1 Mar 2023]

FCA: Regulatory Initiatives Grid - February 2023

The FCA has published the sixth edition of the Regulatory Initiatives Grid setting out upcoming regulatory initiatives. The grid is prepared by the Financial Services Regulatory Initiatives Forum, which comprises the FCA, PRA, Bank of England (BoE), the Payment Systems Regulator (PSR), the Competition and Markets Authority (CMA), the Information Commissioner’s Office (ICO), The Pensions Regulator (TPR), the Financial Reporting Council (FRC), and HM Treasury (HMT) as an observer.

Among the initiatives included in this edition are: those which preserve regulatory protection while focusing on growth and competitiveness, such as the Senior Managers and Certification Regime (SMCR); those which enable a better use of technology and innovation (for example, consultations on rules for the stablecoin regime and the future regulatory regime for cryptoassets); and those that will simplify and reduce regulatory burden (for example, transforming data collection and a strong and simple prudential framework for non-systemic banks and building societies). The next grid will be published towards the end of the year.

The FCA has also published the grid in the form of an interactive dashboard and an Excel spreadsheet to help users interact with the underlying data. The BoE has issued a press release on the publication of the grid. Finally, the minutes of the Financial Services Regulatory Initiatives Forum (FSRIF) for February 2023 have also been published. [28 Feb 2023]

#Stablecoins

HMT: New national hub for fintech to be launched

HMT has announced that a new government-backed national hub for fintech, the Centre for Finance, Innovation and Technology (CFIT), has been launched at an event in Leeds. CFIT follows on from Ron Kalifa’s Review into UK fintech. CFIT will support growth and innovation in the UK, enabling people and businesses to benefit from new waves of technological change and innovation - widening consumer choice, cutting costs, and increasing efficiency for firms. CFIT will have no physical office presence, and instead will focus on helping firms achieve truly global scale in innovation hubs across the country, working across finance, technology, academia and policy-making.

Alongside the CFIT announcement, the UK Infrastructure Bank has announced that it is expanding its presence at its Leeds office. [28 Feb 2023]

#Innovation

BSP: Banks to study cuts in e-payment fees

​The Bangko Sentral ng Pilipinas (BSP) has announced that it is continuing to work with banks on measures to lower or waive transaction fees for small e-payments to make financial digitalization more inclusive. [1 Mar 2023]

SEC charges individual with defrauding investors in crypto asset trading platform

The SEC has charged the former co-lead engineer at a crypto trading platform for his role in a multiyear scheme to defraud equity investors along with the CEO and others. Investigations into other securities law violations and into other entities and persons relating to the alleged misconduct are ongoing.

According to the SEC’s complaint, the individual created software code that allowed FTX customer funds to be diverted to a crypto hedge fund owned by the CEO and others, despite false assurances to investors that the crypto trading platform was safe with sophisticated risk mitigation measures to protect customer assets and that the crypto hedge fund was just another customer with no special privileges. The complaint alleges that the individual knew or should have known that such statements were false and misleading.

The complaint also alleges that individual was an active participant in the scheme to deceive  investors on the crypto trading platform. The complaint further alleges that, even as it became clear that the crypto hedge fund and the crypto trading platform could not make customers whole, as the individual and CEO directed hundreds of millions of dollars in customer funds from the crypto trading platform to the crypto hedge fund, which were used for additional venture investments and loans to the individual, CEO and other executives.  Moreover, according to the complaint, as the crypto trading platform neared collapse, the individual withdrew approximately $6 million from it for personal use and expenditures, including the purchase of a multi-million-dollar house and donations to charitable causes. In a parallel action, the U.S. Attorney’s Office for the Southern District of New York and the Commodity Futures Trading Commission (CFTC) announced charges against the individual. [28 Feb 2023]