FinTech Global FS Regulatory Round-up - w/e 28 February 2025

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Global

FATF: Second consultation on recommendation 16 on payment transparency

The Financial Action Task Force (FATF) has published its second consultation on revisions to Recommendation 16 (R.16), Interpretive Note 16 (INR.16) and the related glossary of specific terms, to adapt them to the changes in payment business models and messaging standards. 

R.16 and INR.16 need to be updated to ensure that the FATF Standards remain technology-neutral and follow the principle of ‘same activity, same risk, same rules’. The proposed revisions also aim to help make cross-border payments faster, cheaper, more transparent and inclusive, whilst remaining safe and secure, an objective that is part of the G20 Priority Action Plan.

Alongside the consultation, the FATF has published an explanatory memorandum that explains the policy intent of the key proposals for revisions in detail, and sets out how the responses to the first consultation, which took place from February-May 2024, have been taken into account.

Responses are requested by 18 April 2025. [25 Feb 2025] #Payments

FSB: Letter to G20 Finance Ministers and Central Bank Governors

The Financial Stability Board (FSB) has published a letter from its Chair, Klaas Knot, to G20 Finance Ministers and Central Bank Governors ahead of their meeting on 26-27 February 2025, setting out the work that is underway in 2025 and its relevance to financial stability.

The letter notes that shifting financial conditions and geopolitical uncertainty call for continued vigilance on financial stability. With key reforms developed or nearing completion, the FSB is shifting toward a greater focus on implementation. This work will take a prominent role in 2025 as the FSB undertakes a strategic review of 15 years of monitoring reform implementation. The review is intended to provide insights into the effectiveness of the monitoring of post-global financial crisis regulatory reforms and identify areas where the FSB can make improvements. The FSB will deliver an interim report on this work to the G20 in October.

The FSB will also continue work on:

• the cross-border payments initiative, noting that while progress has been made on priority actions under the G20 roadmap, many structural issues have been uncovered which require further effort; and
• continuing to address digital innovation, including delivering a thematic peer review on implementation of the FSB’s cryptoasset recommendations, reporting on how to monitor AI adoption and assess related vulnerabilities in the financial sector, and finalising for delivery to the G20 in April, the format for operational incident reporting exchange (including cyber events). [24 Feb 2025] #AI #Payments #Cyber

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UK

FCA: Individual convicted for illegally operating crypto ATM network

The FCA has reported that an individual was sentenced to four years in prison for illegal crypto activity worth over £2.5m and associated offences. Between December 2021 and March 2022, the defendant operated crypto automated teller machines (ATMs) at 28 different locations via his company despite being refused registration with the FCA. The individual was also convicted for forgery, using false identity documents, and possessing criminal property.

The is the first sentence handed down for unregistered cryptoasset activity in the UK.  [28 Feb 2025] #Crypto 

FCA: Research note – role of AI in consumer credit decisions

The FCA has published a research note, as part of its AI research series, on the role of AI in credit decisions for consumers. The research tested whether participants were able to identify errors caused either by incorrect data used by a credit scoring algorithm or by flaws in the algorithm’s decision logic itself. It also explored the relative effectiveness of different methods for explaining the outputs of AI to consumers in the context of the use of determining consumers’ creditworthiness.

The research showed that that the method of explaining algorithm-assisted decisions significantly impacted participants’ ability to judge these decisions; however, the impact of the explanations varied depending on the type of error.

While providing additional information about the inner workings of the algorithm was well received by consumers and gave them greater confidence in their ability to disagree with the algorithm’s decisions, more information may not always be helpful for decision-making and could lead to worse outcomes for consumers by impairing their ability to challenge errors. When and where this is true depends on the specific context.

The FCA notes that the findings reiterate the value of testing accompanying materials that may be provided to consumers when explaining AI, machine learning (ML) and/or algorithmic decision-making. The findings also underscore the importance of testing consumers’ decision-making within the relevant context, rather than relying solely on self-reported attitudes. [24 Feb 2025] #AI

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Europe

ECB: Role of the digital euro in digital payments and finance

The European Central Bank (ECB) has published a contribution by Piero Cipollone, Member of the Executive Board, based on his remarks at the Cryptoasset Lab Conference. Mr Cipollone highlighted the need to close the productivity gap between the US and the EU by focusing on digital payments and digital finance. He argued that a digital euro 'would give us the chance to increase efficiency, competition, innovation and resilience while allowing European private payment solutions to scale up and protect our monetary sovereignty'.

As central bank money is currently only available in the form of cash to firms and households, Mr Cipollone emphasised the importance of providing a digital equivalent to banknotes. He also touched on some of the benefits a digital euro would bring to consumers and merchants, and how it could foster competition and innovation.

Mr Cipollone additionally discussed the role of central bank money and the Eurosystem’s exploratory work. In terms of next steps, the Eurosystem will aim to make it possible to settle distributed ledger technology (DLT) transactions in central bank money, with a view to enabling the further development of DLT on the market. Looking further ahead, the ECB will investigate how DLT can be used to create a more integrated financial market.  [28 Feb 2025] #DigitalEuro #CBDC #DLT #Payments

EBA responds to EC on technical standards regarding authorisation for issuers of ARTs

The European Banking Authority (EBA) has issued an Opinion in response to the European Commission’s (EC's) proposed changes to its draft regulatory technical standards (RTS) on the information to be provided to competent authorities when authorising the offer to the public of asset-referenced tokens (ARTs) or the admission to trade them under the Markets in Cryptoassets Regulation (MiCAR).

The EBA accepts the changes proposed by the EC, particularly those considered as substantive, however it invites the EC to consider amending the Level 1 text to include those elements that were set out in the draft RTS submitted to the EC, given their importance from a supervisory perspective.  [27 Feb 2025] #ARTs #MiCAR #Crypto

EC: RTS supplementing MiCAR

The European Commission (EC) has published the following delegated acts relating to MiCAR:

• Commission Delegated Regulation with regard to RTS specifying records to be kept of all cryptoasset services, activities, orders and transactions undertaken;
• Commission Delegated Regulation with regard to RTS specifying the requirements for policies and procedures on conflicts of interest for cryptoasset service providers (CASPs) and the details and methodology for the content of disclosures on conflicts of interest; and
• Commission Delegated Regulation with regard to RTS specifying the requirements for policies and procedures on conflicts of interest for issuers of ARTs.

These delegated acts will be published in the Official Journal (OJ) and enter into force, subject to no objections from either the European Parliament (EP) or the Council.  [27 Feb 2025] #MiCAR #Crypto

ESMA: Guidelines on standards for the maintenance of systems and security access protocols under the MiCAR

The European Securities and Markets Authority (ESMA) has published the translations of its guidelines on the specification of Union standards for the maintenance of systems and security access protocols for offerors and persons seeking admission to trading of cryptoassets other than asset referenced tokens (ARTs) and e-money tokens (EMTs) under MiCAR.

The guidelines apply from two months after the date of publication of the translations on ESMA’s website. [26 Feb 2025] #MiCAR #Crypto

ESMA: Guidelines on reverse solicitation under the MiCAR

ESMA has published the translations of its guidelines on situations in which a third-country firm is deemed to solicit clients established or situated in the EU and the supervision practices to detect and prevent circumvention of the reverse solicitation exemption under MiCAR.

The guidelines apply from two months after the date of publication of the translations on ESMA’s website. [26 Feb 2025] #MiCAR #Crypto

ESMA: Guidelines on transfer services for cryptoassets under MiCAR

ESMA has published the translations of its guidelines on transfer services for cryptoassets under MiCAR.

The guidelines apply from two months after the date of publication of the translations on ESMA’s website. [26 Feb 2025] #MiCAR #Crypto

ESMA: AI in EU investment funds

ESMA has published a Trends, Risks and Vulnerabilities (TRV) Analysis on AI in EU investment funds. The article evaluates the impact of AI and its recent advancements in the EU investment management industry. The first part of the analysis focuses on the extent to which AI tools play a role in the investment process. The second part assesses funds' investment in AI by looking at the portfolio allocation to AI-related companies. [25 Feb 2025] #AI

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Australia

ASIC announces that it shuts down 130 investment scam websites per week

The Australian Securities and Investments Commission (ASIC) has released its latest Enforcement and regulatory update (REP 804) which reveals that over 10,000 investment scam websites and online advertisements have been shut down by the agency since July 2023. Notably, of the 10,240 sites removed, 7,227 were for fake investment platforms, 1,564 included phishing scam hyperlinks and 1,257 were platforms for cryptocurrency investment scams (which equates to an average of 130 investment scam websites being shut down per week). [28 Feb 2025] #Crypto #Fraud

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Hong Kong

Financial Secretary announces initiatives in 2025-26 Budget 

In his 2025-26 Budget Speech, Financial Secretary, Mr Paul Chan, outlined key initiatives to strengthen Hong Kong's economic foundation and accelerate development through reform and innovation. Further information on the Budget can be found here; however, among the key fintech-related initiatives are:

Innovation and technology

• The HKMA will publish a practice guide by making reference to global development trends and experience in the generative AI sandbox jointly launched with Cyberport in 2024.             

• The HKEX is actively taking forward the establishment of a dedicated 'technology enterprises channel' to facilitate specialist technology and biotechnology companies in preparing for listing applications, supported by the SFC.     

Fixed income and currency hub

• The Government will conduct research into the current legal and regulatory regime related to the issuance and transactions of digital bonds and explore enhancement measures to promote the wider adoption of tokenisation in Hong Kong's bond market

Virtual asset (VA) development

• The Government will soon promulgate a second policy statement on the development of VAs to explore how to leverage the advantages of traditional financial services and innovative technologies, enhance the security and flexibility of real economy activities, and encourage local and international companies to explore the innovation and application of VA technologies.       

• The Government will consult on the licensing regimes for VA over-the-counter trading services and custodian services within 2025.    

The SFC, the HKMA, the Insurance Authority, and the Accounting and Financial Reporting Council have announced their support for the measures announced by Mr Chan.  [26 Feb 2025] #VirtualAssets #AI #Cyber #Tokenisation #Sandbox #Crypto

SFC forges consensus with Asia-Pacific securities regulators at IOSCO APRC meetings in Vietnam

The SFC has spearheaded dialogues among Asia-Pacific securities regulators at the regional committee meetings of the International Organisation of Securities Commissions (IOSCO) Asia-Pacific Regional Committee (APRC), chaired by the SFC's Chief Executive Officer, Ms Julia Leung.  The meetings took place in Da Nang, Vietnam, from 19 to 21 February 2025.

Members of the APRC agreed on a coordinated regional approach to tackle scams and online harm.  They also shared experiences and techniques to detect and investigate investment frauds and to harness the transformative forces of technology in addressing emerging issues.

SFC senior executives participated in the APRC Enforcement Directors’ Meeting and the Supervisory Directors’ Meeting, exchanging experiences and sharing perspectives on issues such as enforcement priorities and trends, use of technologies in discharging regulatory duties, the emerging use of generative AI in financial sector, and supervisory approaches on virtual asset safekeeping.

Ms Leung met with Ms Vu Thi Chan Phuong, Chairwoman of the State Securities Commission (SSC) of Vietnam, and welcomed the SSC as the 14th and latest signatory to the APRC Multilateral Memorandum of Understanding for Supervisory Cooperation, an information-sharing mechanism for supervisory cooperation among securities regulators in the Asia-Pacific region. Ms Leung delivered a keynote speech at the SSC Vietnam Symposium, in which she highlighted the regional challenges and shared insights on issues of common interest among financial regulators, including cryptoassets, and online scams.

Ms Leung also co-chaired the EU-Asia-Pacific Forum on Financial Regulation with Ms Nathalie De Basaldua, Director, General Affairs, Directorate‑General for Financial Stability, Financial Services and Capital Markets Union, in which financial authorities and senior regulators from Europe and Asia-Pacific discussed the latest developments in financial supervision and regulation for digitalisation and fintech.  [21 Feb 2025] #AI #GenAI #Crypto #VirtualAssets

 

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Thailand

SECT holds workshop to combat rise of mule accounts

The Securities and Exchange Commission Thailand (SECT) has announced that it held a workshop in collaboration with the Thai Digital Asset Operators Trade Association (TDO), digital asset business operators, and relevant organizations to lay out more measures for tackling mule accounts. [25 Feb 2025] #DigitalAssets

 

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India

IFSCA consults on regulatory approach towards tokenization of real-world assets

The International Financial Services Centres Authority (IFSCA) has published a consultation on its regulatory approach towards the tokenization of real-world assets. The proposed regulatory approach centres around four broad themes:

• definition and key characteristics of digital tokens;
• mechanisms for the issuance, custody, trading, clearing and settlement of digital tokens;
• an appropriate risk management framework for digital tokens; and
• providing suitable catalysts for the organic growth and development of the digital tokens market.

Responses are requested by 20 March 2025. [26 Feb 2025] #Tokenisation