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In this regular update, we round-up FinTech-related regulatory developments for the week ending 18 June 2021.



FSB: Overview of responses to consultation on regulatory and supervisory issues relating to outsourcing and third-party relationships

The Financial Stability Board (FSB) has published an overview of responses to its consultation on regulatory and supervisory issues relating to outsourcing and third-party relationships. The FSB received 39 responses from a wide range of stakeholders, who generally agreed with the challenges and issues identified in the consultation paper and suggested a range of measures to address these, including:

  • the development of global standards on outsourcing and third-party risk management;
  • the adoption of consistent definitions and terminology;
  • pooled audits, certificates and reports;
  • dependency mapping and enhanced supervisory oversight; and
  • enhanced cross-border cooperation and dialogue with stakeholders. [14 Jun 2021]




The Payment and Electronic Money Institution Insolvency Regulations 2021

The Payment and Electronic Money Institution Insolvency Regulations 2021 (and accompanying explanatory memorandum) have been published. The Regulations create a new special administration regime for payment and electronic money institutions and make an amendment to the Bank Recovery and Resolution 2018 (BRRD Exit SI) and to the Bank Recovery and Resolution (Amendment) (EU Exit) Regulations 2020 (BRRD2 SI) to correct a minor defect in the BRRD2 SI.

The Regulations will enter into force on 8 July 2021. [18 Jun 2021]



FCA: Research note on cryptoassets

The FCA has published a research note on cryptoassets. The research note sets out the findings from a recent consumer study. It highlights the growing public awareness of cryptoassets, investment trends and future expectations within this area. The FCA will use the findings to develop its thinking on the harms and benefits of cryptoassets to consumers. [17 Jun 2021]

BoE: Speech on CBDCs

The BoE has published a speech by Tom Mutton, Director - Fintech, on its work in relation to central bank digital currencies (CBDCs). In his speech, Mr Mutton spoke about: how the BoE is approaching its work on CBDCs; lessons learned from the recent discussion paper; and the BoE's future outlook in this area. [17 Jun 2021]

BoE Speech: Innovation to serve the public interest

The BoE has published a speech by Governor Andrew Bailey on innovation to serve the public interest. Mr Bailey spoke about:

  • new forms of digital money;
  • the work of the Financial Policy Committee (FPC) in relation to the design and regulation of stablecoins;
  • the regulatory model for stablecoins;
  • a possible central bank digital coin (CBDC); and
  • the need to ensure the safety and security of money.

The Governor's remarks follow on from the BoE's release of a discussion paper on new forms on digital money which was released on 7 June 2021. [15 Jun 2021]




ATI: Report on AI in Financial Services

The Alan Turing Institute (ATI) has published report commissioned by the FCA, which explores the use of artificial intelligence (AI) and the importance of responsible innovation in the financial services sector. The report provides an introduction to AI; discusses general challenges and guiding principles for the responsible adoption of AI; maps out potential benefits and harms associated with the use of AI in financial services; and examines the fundamental role of AI transparency in pursuing responsible innovation. [14 Jun 2021]





EIOPA: Report on AI governance principles

The European Insurance and Occupational Pensions Authority (EIOPA) has published a report setting out artificial intelligence (AI) governance principles for the European insurance sector. The report aims to help insurance companies when putting in place measures to deal with AI and provides guidance on how to implement the principles throughout the lifecycle of an AI application. [17 Jun 2021]



Covid-19: ECB speech on the use of cash

The ECB has published a speech by Fabio Panetta, Member of the Executive Board of the ECB, on the use of cash during Covid-19. Mr Panetta spoke about:

  • how the use of cash has remained strong during Covid-19;
  • the need to protect cash as a means of payment;
  • the ECB's plans to assess and reduce the environmental footprint of cash by way of new products and processes; and
  • the potential digital euro as a complement to cash. [15 Jun 2021]





Council of Financial Regulators releases Quarterly Statement

The Council of Financial Regulators (CFR) has published a statement following its quarterly meeting. The CFR comprises the Australian Prudential Regulation Authority (APRA), ASIC, the Australian Treasury and Reserve Bank of Australia (RBA).

The matters discussed at the quarterly meeting included: housing market risks, financial risks from climate change, financial market infrastructure (FMI) developments, cyber risk and the regulatory arrangements for e-conveyancing.

The statement also referred to the CFR’s annual meeting held with representatives from the Australian Competition and Consumer Commission, Australian Taxation Office and the Australian Transaction Reports and Analysis Centre (AUSTRAC). Participants discussed the Covid-19 pandemic and recovery, regulation of crypto-assets and Australia’s role in the G20 Roadmap for Enhancing Cross-border Payments. [17 Jun 2021]

ASX releases corporate actions straight-through processing service

The Australian Securities Exchange (ASX) has announced the release of its real-time corporate actions straight-through processing (STP) service. The STP service will enable the processing and delivery of information about corporate actions and events ‘within seconds’ of announcement.

ASX Managing Director and CEO Dominic Stevens says the STP project has achieved its aim 'to lower the inherent risks for all participants by simplifying, standardising and removing manual steps in announcement, data capture and support processes'.

Further information about the STP service is available on the ASX website. [16 June 2021]




Hong Kong

HKMA implements initiatives to encourage use of regtech, including launching Regtech Adoption Practice Guide series

The HKMA has launched a new Regtech Adoption Practice Guide series as part of its two-year regtech promotion roadmap announced in November 2020 (see our previous update), to provide banks with detailed practical guidance on the adoption of regtech solutions.

Each Regtech Adoption Practice Guide focuses on a specific technology or application area identified in the HKMA’s white paper published in November 2020 (see our previous update).  It succeeds the Regtech Watch series (see the seventh and final issue in the summary below) and provides banks with detailed guidance on how to overcome implementation challenges.

The first issue in the series is "Cloud-based Regtech solutions”.  Cloud computing is a key underpinning technology behind regtech solutions, providing benefits such as timely offsite support, fast implementation and highly scalable solutions.  The white paper suggested that using cloud-based technology has enabled banks to display greater operational resilience during the Covid-19 pandemic.

In addition, the HKMA will host its flagship regtech virtual event “Unlocking the Power of Regtech” on 30 June 2021.  This is intended to bring together senior figures from the global regtech ecosystem (including financial institutions, regulators, regtech providers and other industry experts) to share their experience and insights on the potential of regtech.  Further information on the event (including instructions for registration) can be found on the event page.  [17 Jun 2021]

HKMA publishes seventh and final issue of Regtech Watch on three-year roadmap to adopt suptech

The HKMA has published the seventh and final issue of its Regtech Watch, outlining its three-year roadmap to integrate supervisory technology (suptech) into its processes.  The Regtech Watch series will be succeeded by a Regtech Adoption Practice Guide series (see summary above).

The HKMA is aiming to enhance the effectiveness and forward-looking capability of its supervisory processes through more extensive use of suptech.

  • The initial focus will be on developing a centralised platform for supervisors to view and access information about authorised institutions (AIs) in a single location, and building a knowledge management system for storing structured supervisory information as well as unstructured information.  The HKMA will conduct a series of proofs-of-concept (PoCs) to ascertain the feasibility of different suptech solutions, including robotic process automation and speech-to-text tools.
  • The HKMA will then explore automated intelligence gathering and machine learning techniques that will enable the capture and processing of large amounts of structured and unstructured information.  PoCs on network analysis and on sentiment analysis tools will be conducted to facilitate the gathering of emerging risk signals.  The HKMA will also consider the use machine-learning techniques such as text tokenisation and summarisation in banking supervisory processes.
  • Finally, the HKMA will investigate methods to make policy assimilation and dissemination more accessible, such as distributed ledger technology embedded in smart contracts.  The ideal end goal would be for a policy change to be automatically transmitted to banks’ systems, executing a change to their internal regulatory systems and rules engine with minimal human participation.  [17 Jun 2021]


FSDC issues research report on cybersecurity strategy for Hong Kong financial services industry

The Financial Services Development Council (FSDC) has released a research report entitled "Cybersecurity Strategy for Hong Kong’s Financial Services Industry” (see full report and highlights).  The report details how cyber-attacks are affecting the financial industry, assesses the industry’s cyber resilience, and outlines ways to enhance the industry’s cyberspace safety framework.

Mr Laurence Li, the Chairman of the FSDC, commented that the pandemic has accelerated the adoption of technology and further highlighted the importance of cybersecurity.  In order to maintain its status as an international financial centre, Hong Kong needs to provide businesses, investors and the general public with a secure marketplace, which only a holistic yet flexible cybersecurity framework can guarantee.

The report outlines how Hong Kong fares internationally on four key dimensions – (1) cybersecurity policy and strategy, (2) legal and regulatory frameworks, (3) cybersecurity culture (and society), and (4) cybersecurity education, training and skills.

It recommends the following measures to enhance Hong Kong's cyber resilience:

  • developing a dedicated cyberspace safety roadmap with policy priorities for Hong Kong;
  • developing cyberspace protection legislation and harmonising regulations across the financial sector;
  • enhancing talent development;
  • operationalising preparedness at industry level through industry-wide stress test and data recovery enhancement.  [10 Jun 2021]




SECT Board approves rules governing digital asset exchanges service provision in respect of utility tokens and certain types of cryptocurrencies

The SECT Board has approved new rules that prohibit digital asset exchanges from providing services in relation to utility tokens and certain types of cryptocurrencies, including meme tokens, fan tokens, non-fungible tokens, and digital tokens which are utilised in blockchain transaction and issued by digital asset exchanges or related persons.

Exchanges are required to comply and revise their listing rules in accordance with the SECT notification within 30 days of the effective date thereof. [12 Jun 2021]






SEBI revises eligibility requirements for regulatory sandbox

SEBI has released revised eligibility requirements for the Framework for Regulatory Sandbox. [14 Jun 2021]




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