Welcome to Shearman & Sterling’s FinTech Blog, where we provide you with insight on key trends in the FinTech ecosystem. Here you can find relevant information with the latest on digital banking, FinTech regulation, digital assets, blockchain, AI, and more.
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Three Central Banks Explore Advantages Of Wholesale Central Bank Digital Currencies
11/27/2018On November 15, 2018, the Bank of England, the Bank of Canada and the Monetary Authority of Singapore published a joint report entitled, "Cross-Border Interbank Payments and Settlements." Referring to current industry projects to address existing problems in cross-border payments affecting end-users, commercial banks and central banks, the report analyzes these issues and discusses proposed new models for processing cross-border transactions. The report sets out three models for cross-border payments and settlements and discusses the key considerations and dependencies of each model. Each model is then assessed against the existing identified challenges in cross-border payments.
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UK Crypto-Assets Task Force Outlines the Path to Crypto-Asset Regulation
11/06/2018The U.K. Crypto-Assets Task Force has published its Final Report. Established in March 2018 by the U.K. Chancellor of the Exchequer as part of the U.K. government's FinTech Sector Strategy, the Task Force comprises representatives from HM Treasury, the U.K. Financial Conduct Authority (FCA) and the Bank of England.
The Task Force engaged with over 60 firms and other stakeholders to seek their views on topics including: the trajectory of the industry, the risks, benefits and underlying economic value of crypto-assets and the U.K.’s future regulatory approach. Stakeholders were of the view that there is a lack of regulatory clarity in the U.K. and that regulation should be introduced to support the legitimate players in the crypto-assets market. It is also crucial in mitigating risks. There were also calls for regulatory and tax frameworks to be aligned.
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New AML Recommendations for Virtual Assets
10/25/2018Citing an “urgent need” to step up global efforts to prevent the use of virtual assets for crime and terrorism, the Financial Action Task Force (FATF) updated its recommendations for the regulation of virtual assets. Among other things, the FATF recommended broader definitions of “virtual assets” and “virtual asset service providers” to include exchanges, wallet providers and certain initial coin offering service providers.
The FATF is an inter-governmental policy-making body responsible for promoting the implementation of legal, regulatory and operational anti-money laundering (AML) and combatting the financing of terrorism (CFT) standards. Its recommendations are not binding law, but rather a set of standards intended for member nations to incorporate within their rulemakings. FATF President Marshall Billingslea has said that the organization also plans to issue AML/CFT rule recommendations in respect of virtual assets and clarify how the FATF expects such rules to be enforced by June 2019. Additionally, the FATF plans to review the scope of activities covered under its amended recommendations and glossary within the next 12 months and consider whether further updates are necessary.
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EU Supervisory Authority Reports on ICO and Crypto-Asset Risks and Potential Regulation
10/19/2018The European Securities and Markets Authority (ESMA) has published an own-initiative report prepared by its Securities and Markets Stakeholder Group (SMSG). The purpose of the report is to provide advice to ESMA on steps it might take to contain the risks of initial coin offerings (ICOs) and crypto-assets, on top of existing regulation.
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Financial Stability Board Recommends Vigilant Ongoing Monitoring of Crypto-Assets
10/10/2018The Financial Stability Board has published a report entitled "Crypto-asset markets: Potential Channels for future financial stability," in which it outlines its findings following its assessment of the crypto-asset markets in 2018.
The FSB has considered the primary risks present in crypto-assets markets as low liquidity, volatility, leverage risks, as well as technological and operational risks (including cyber security risks). The FSB considers that crypto-assets lack the key attributes of sovereign currencies and do not serve as a common means of payment, a stable store of value or a mainstream unit of account. Based on the available information, the FSB considers that crypto-assets do not pose a material risk to global financial stability at this time. However, the FSB's report highlights that there could be financial stability implications from these primary risks through a variety of transmission channels including: (i) confidence effects; (ii) financial institutions' exposures to crypto-assets, related financial products and entities that are financially impacted by crypto-assets; (iii) the level of market capitalisation of crypto-assets; and (iv) the extent of their use for payments and settlements.
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CFTC and ASIC Agree to FinTech Information Sharing Arrangement
10/09/2018The Commodity Futures Trading Commission (CFTC) and the Australian Securities and Investments Commission (ASIC) last week signed an arrangement designed to support cross-border FinTech innovation through their respective FinTech initiatives, LabCFTC and the ASIC Innovation Hub. The arrangement will facilitate information sharing between the two regulators in respect of emerging trends and developments, regulatory issues pertaining to FinTech innovations and best practices, among other things. It also includes a referral mechanism that will allow the CFTC and ASIC to refer to one another innovators that wish to operate or have questions about operating in the other’s jurisdiction. The arrangement further calls for joint proofs of concept, trials and innovation competitions, where permitted, as well as periodic meetings to update each other on FinTech and RegTech trends and developments of common interest.
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CFTC and Monetary Authority of Singapore Sign FinTech Collaboration Agreement
09/13/2018The U.S. Commodity Futures Trading Commission (CFTC) and the Monetary Authority of Singapore (MAS) today signed a cooperation arrangement on FinTech innovation, which is to be supported by the agencies’ respective FinTech initiatives, LabCFTC and the MAS Financial Technology & Innovation Group. The arrangement will facilitate inter-agency cooperation on FinTech innovation and referrals for innovators that wish to enter the other regulator’s market. In addition, it will provide an information sharing framework between the agencies focused on FinTech market trends and developments, innovations and best practices within their respective jurisdictions. The arrangement also calls for joint events, proofs of concept, trials and innovation competitions where permitted, along with periodic meetings to discuss FinTech issues of common interest.
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Regulators Unveil Plans to Launch Global Financial Innovation Network
08/17/2018On August 7, 2018, the U.K. Financial Conduct Authority (FCA), the Consumer Financial Protection Bureau (CFPB) and 10 other international financial regulators and related organizations announced the launch of the Global Financial Innovation Network (GFIN). The announcement, which was accompanied by a consultation paper on the role and objectives of the GFIN, serves as part two of a whitepaper published earlier this year by the FCA on the possibility of forming a “global sandbox.” The GFIN, as proposed, would consist of three components: (i) information sharing and collaboration through a network of regulators; (ii) joint policy work and regulatory trials; and (iii) cross-border firm trials.
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Government of Gibraltar Publishes Outline of Forthcoming Token Regulatory Framework
03/14/2018On March 14, 2018, the Government of Gibraltar published a white paper outlining forthcoming proposals to regulate token sales, secondary token market platforms and token investment services.
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The International Comparative Legal Guide to: Fintech 2017
05/19/2017Reena Sahni led the effort to write a U.S. chapter of ICLG’s Fintech 2017 publication. They commented on what types of funding are available for new and growing businesses, regulatory frameworks, access to talent, and IP protection across the Fintech landscape.
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