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

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 implicit trust structures. It discusses how the tokenization of money changes links of trust and opens up a potentially more efficient market structure for exchanging money. The paper concludes with a proposed global marketplace to trade tokenized money directly across borders.

#Payments

The Committee on Payments and Market Infrastructures (CPMI) has published, for public consultation, a report detailing the proposed ISO 20022 harmonization requirements for cross-border payments. The harmonization requirements will supplement existing guidance for market practice by providing high-level requirements to be included in the various international and local guidelines for use. The proposed introduction of the requirements in 2025 would be consistent with SWIFT’s decision to remove the ability to send payment messages for cross-border message texts (MT) over the network.

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

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, CEO, Financial Market Infrastructure. [1 Mar 2023]

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

Among the initiatives included in this edition are: those that preserve regulatory protection while focusing on growth and competitiveness, such as the Senior Managers and Certification Regime (SMCR); those that 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 the regulatory burden (for example, transformation of data collection and a strong and simple supervisory 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 timetable. Finally, the minutes from the Financial Services Regulatory Initiatives Forum (FSRIF) for February 2023 have also been published. [28 Feb 2023]

#Stablecoins

HMT has announced that a new government-backed national hub for fintech, the Center 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 – expanding consumer choice, cutting costs and increasing business efficiency. CFIT will have no physical office presence and will instead focus on helping firms achieve truly global scale in innovation hubs across the country, working across finance, technology, academia and policymaking.

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

#Innovation

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

The SEC has charged the former co-lead engineer at a crypto trading platform with his role in a multi-year scheme to defraud stock investors along with its CEO and others. Investigations into other securities offenses and other entities and individuals connected to the alleged misconduct are ongoing.

According to the SEC’s complaint, the individual created software code that allowed FTX client 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 secure with sophisticated risk mitigation measures to protect client funds and that the crypto hedge fund only was 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 the individual was an active participant in the scheme to defraud investors on the crypto trading platform. The complaint further alleges that even when it became clear that the crypto hedge fund and crypto trading platform could not make customers whole, when the individual and CEO diverted hundreds of millions of dollars in client funds from the crypto trading platform to the crypto hedge. fund, which was used for further venture investments and loans to the individual, CEO and other executives. Furthermore, according to the complaint, as the crypto-trading platform neared its collapse, the individual withdrew about $6 million from it for personal use and expenses, including the purchase of a multi-million dollar house and donations to charity. In a parallel action, the US 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]