FinTech Global FS Regulatory Round-up - w/e 24 January 2025

ICYMI

• Juggling water – How to regulate AI in financial services? 
• Teetering on the brink of quantum utility – Not if, but when…
• Rewiring the infrastructure – Making transactions faster
• The sanity of crowds – Can smart data initiatives transform consumer finances? 

Global

FSB: Work programme 2025

The Financial Stability Board (FSB) has published its 2025 work programme, which summarises ongoing and planned initiatives for the year. Work will continue in key areas such as non-bank financial intermediation (NBFI) and cross-border payments. The FSB will keep monitoring emerging financial vulnerabilities and continue its work to implement agreed reforms and evaluate their effects with a view to maintain the resilience of the global financial system. Among other matters, the FSB's priority areas include harnessing the benefits of digital innovation while containing its risks and further enhancing cross-border payments.

The annex to the report provides an indicative timeline of key FSB publications and external events planned for 2025-2026.  Included in the timeline are: a thematic peer review of crypto recommendation implementation (October 2025); a combined report on the progress of the cross-border payments roadmap and key performance indicators (KPIs) (October 2025); and a payments summit (November 2025).  [23 Jan 2025] #Payments 

UK

FCA/PSR: Next steps for open banking

The FCA and the Payment Systems Regulator (PSR) have issued a statement setting out next steps for open banking. In this regard, a new independent central operator will be established to coordinate how variable recurring payments are made. The statement also discusses the benefits of variable recurring payments. [23 Jan 2025] #Payments #OpenBanking

FOS expects over 37,000 fraud and scams complaints in 2025/26

The Financial Ombudsman Service (FOS) has announced that it expects to receive more than 37,000 fraud and scams complaints next year, including cases involving authorised push payment (APP) scams, cryptocurrency fraud and ‘safe account’ scams. This is an increase on the 33,000 fraud and scams cases FOS forecast it will receive by the end of the current financial year. FOS predicts that, overall, it will receive around 240,000 new cases next year. [23 Jan 2025] #APPScams #Crypto

Europe

ESMA: Opinion on RTS specifying certain requirements in relation to conflicts of interest for CASPs – MiCAR

The European Securities and Markets Authority (ESMA) has published an opinion on the regulatory technical standards (RTS) specifying certain requirements in relation to conflicts of interest for cryptoasset service providers (CASPs) under the Markets in Cryptoassets Regulation (MiCAR).

ESMA suggests a limited number of changes to the amendments proposed by the European Commission (EC). ESMA acknowledges that an appropriate balance should be found between the protection of investors and financial stability related objectives, and promoting safe and sustainable innovation.  [24 Jan 2024]  #MiCAR #Crypto

ESMA: Factsheets on recent developments in cryptoassets

ESMA has published factsheets on recent developments in cryptoassets in relation to lending, borrowing and staking and decentralised finance (DeFi). The factsheets summarise the joint report which was issued earlier in January by ESMA and the European Banking Authority (EBA) under MiCAR.  [24 Jan 2024] #MiCAR #Crypto #DeFi #Staking

SRB: Update on operational continuity in resolution

The Single Resolution Board (SRB) has published revisions to the operational guidance on operational continuity in resolution (OCIR). The guidance provides further clarifications to banks on how to implement SRB expectations for resolvability related to: service identification and mapping; assessment of operational continuity risk; and mitigating measures, such as having adequately documented, resolution-resilient contracts, appropriate management information systems and governance arrangements.

The current revisions follow the development of new frameworks, such as the Digital Operational Resilience Act (DORA), and new provisions, such as the European Banking Authority (EBA) Guidelines on improving resolvability. The guidance also includes further clarifications stemming from the SRB’s Expectations for Banks, updated references and citations, and removes redundant content. Given the limited nature of these revisions, which introduce no significant changes for the industry, a public consultation was not held. [23 Jan 2025] #OpRes #DORA

ESMA: New governance structure for transition to T+1

The European Securities and Markets Authority (ESMA), the European Commission (EC) and the European Central bank (ECB) have launched a new governance structure to support the transition to the T+1 settlement cycle in the EU. Following ESMA’s report with recommendations on the shortening of the settlement cycle, the structure has been designed to oversee and manage the operational, regulatory and technological aspects of this transition. The key elements of the new governance model include:

• An Industry Committee, composed of senior leaders and representatives from market players.
• Several technical workstreams, operating under the Industry Committee, focusing on the technological operational adaptations needed and legal and regulatory issued related to the transition to T+1.
• A Coordination Committee, chaired by ESMA and with representation from the EC, the ECB, ESMA and the chair of the Industry Committee to ensure coordination between the authorities and the industry.

ESMA has recommended 11 October of 2027 as the optimal date for the transition to T+1 in the EU. Additionally, ESMA proposed a phased approach to transition. [23 Jan 2025] #T+1 

EIOPA: Q&As regarding DORA

The European insurance and Occupational Pensions Authority (EIOPA) has published three answers to questions concerning DORA.  The questions and answers (Q&As) concern:

• how firms that are members of a group should calculate the 250 FTE criterium / the application of the EC's SME guidance;
• whether insurance intermediaries falling under Article 1(3) of insurance distribution directive (IDD) are within the scope of Article 2(1)(o) DORA; and
• what types of services should be considered ICT services based on the definition of DORA Article 3(21). [23 Jan 2025] #DORA

ECB: Digital Euro slides

The ECB has published a set of slides on the digital euro which set out the current state of play of the project. The slides explain that the decline of public money has implications for monetary sovereignty. The presentation then covers how a digital euro could strengthen the European payments market by supporting innovation and bolstering existing payment solutions.

On the 'conclusions' slide, the presenters state that an ambitious pace is required, including for the legislative work, to address the risks to competitiveness, resilience and sovereignty in a timely manner. [21 Jan 2025] #DigitalEuro #CBDC

ESMA: provision of certain cryptoasset services in relation to non-MiCAR compliant ARTs and EMTs

ESMA has published a statement related to the offer of asset-referenced tokens (ARTs) and electronic money tokens (EMTs) in the EU under the Market in Cryptoassets Regulation (MiCAR).

The statement provides guidance on how, and under which timeline, cryptoasset service providers (CASPs) are expected to comply with the requirements of Titles III and IV of MiCAR, as clarified in the European Commission (EC) Q&A. National Competent Authorities (NCAs) are expected to ensure compliance by CASPs regarding non-compliant ARTs or EMTs as soon as possible, and no later than the end of Q1 2025.

The EC has also delivered a Q&A, providing guidance on the obligations contained in titles III and IV of MiCAR and how these obligations should apply to CASPs. The Q&A clarifies that certain cryptoasset services may constitute an offer to the public or an admission to trading in the EU and should therefore comply with titles III and IV of MiCAR. [20 Jan 2025] #ART #EMT #MiCAR #Crypto

Hong Kong

HKMA deputy chief executive provides banking sector 2024 year-end review and priorities for 2025

The HKMA's Deputy Chief Executive, Mr Arthur Yuen, has delivered a presentation on the HKMA’s 2024 year-end review and priorities for 2025 for the banking sector. 

Building on the work done in 2024, the HKMA plans to focus on the following areas (among others):

• anti-fraud – implementing controls to protect customers from scams (such as 'Money Safe' and e-banking security measures), collaborating with financial regulators and bigtechs, broadening spectrum of information sharing, enhancing public education, and exploring a more aligned approach for banks to handle customer claims for scam losses and fraud detection tools;
• operational, technology and cyber resilience – assessing implementation of operational resilience framework and third-party risk management (including cloud adoption), strengthening authentication and identity verification, high risk transaction alert, optional enhanced security measures at customers’ choices, uplifting banks’ cyber incident response and recovery capabilities, and ecosystem collaboration on managing systemic cyber risks;
• AML & financial crime risk – identifying potential weak spots amid technological advancement, strengthening monitoring and delivering proportionate guidance, enhancing suspicious activity monitoring through use of AI, uplifting capabilities to mitigate high-end money laundering, increasing information sharing through FINEST, and improving early detection using payments data analytics; and
• suptech and fintech promotion – supporting reasonable innovation including via the GenAI Sandbox and supervisory incubator for distributed ledger technology, supervising with intelligent assistant and enhancing risk data collection.  [22 Jan 2025] #AI #Suptech #Cyber #Fraud #AML

HKMA publishes presentation materials for upcoming briefing to LegCo Panel on Financial Affairs on 3 February 2025

The HKMA has published presentation materials for its upcoming briefing to the Legislative Council (LegCo) Panel on Financial Affairs on 3 February 2025.  Areas of the HKMA's work include (among others):

Banking Stability

• Prudential treatment of cryptoasset exposures – The HKMA is seeking industry's comments on the initial proposals for amending the rules for the local implementation of the Basel standard.  It plans to consult on the draft rules in around March 2025, with a target implementation date of 1 January 2026 (slide 55).

Financial Infrastructure

• Fintech initiatives – The HKMA is progressing with various central bank digital currency projects, including Project mBridge, Project Ensemble, and Project e-HKD+ (slide 70).

Hong Kong as an International Financial Centre

• The HKMA and the Financial Services and the Treasury Bureau introduced the Stablecoins Bill into the LegCo in December 2024 (see our previous update).  The HKMA has also continued to maintain dialogue with the participants of the stablecoin issuer sandbox (slide 86).  [22 Jan 2025]  #Crypto #CBDC #Stablecoins

Thailand

SECT amends digital asset business regulations to support greater variety of digital asset custodial wallet providers

The Securities and Exchange Commission Thailand (SECT) has announced that it has amended the regulations regarding the undertaking of digital asset businesses. The amendments:

• allow digital asset custodial wallet providers from the specified business groups with expertise, experience and readiness for keeping direct custody of financial assets to provide services to digital asset business operators with the same major shareholders; and
• require these digital asset custodial wallet providers to comply with the independence rules as specified by the SECT.

The amended regulations took effect from 16 January 2025. [17 Jan 2025] #Crypto #DigitalAssets #CustodialWallets

India

RBI: Prevention of financial frauds perpetrated using voice calls and SMS

The Reserve Bank of India (RBI) has issued a notification with instructions to financial services firms regarding the prevention of financial frauds perpetrated using voice calls and short message service (SMS). The RBI advises regulated entities to:

• utilise the Mobile Number Revocation List (MNRL) available on the Digital Intelligence Platform (DIP) developed by Department of Telecommunications (DoT), to monitor and clean their customer database;
• provide the verified details of their customer care numbers to DIP for enabling DoT to publish them on the 'Sanchar Saathi' portal;
• use specified numbers when undertaking certain types of call; and
• follow the 'Important Guidelines for sending commercial communication using telecom resources through Voice Calls or SMS' issued by Telecom Regulatory Authority of India (TRAI).

Regulated entities must comply with these instructions by 31 March 2025. [17 Jan 2025] #Fraud #SMS

US

SEC Acting Chair announces new crypto task force

Acting Chair of the Securities and Exchange Commission (SEC), Mark T. Uyeda, has announced the launch of a new crypto task force which will develop a comprehensive and clear regulatory framework for crypto assets. Commissioner Hester Peirce will lead the task force.  [21 Jan 2025] #Crypto