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In this regular update, we round-up FinTech-related financial services regulatory developments for the week ending 24 February 2023.


Recent updates from Herbert Smith Freehills include:



BIS: Speech on innovation and the future of the monetary system 

The Bank for International Settlements (BIS) has published a speech by Agustín Carstens, General Manager, on innovation and the future of the monetary system at the Monetary Authority of Singapore (MAS).  Mr Carstens opened with some observations: first, that in order to flourish, innovation requires a stable and safe infrastructure, and second that various components must be 'able to work together seamlessly'. He then moved on to discuss the role that central banks, including BIS, can play in providing that infrastructure and in facilitating that seamless interaction.  The speech also covered stablecoins, central bank digital currencies (CBDCs) and tokenised deposits. [22 Feb 2023]



FSB: Letter to G20 Finance Ministers and Central Bank Governors; reports on commodity markets and DeFi

The FSB has published the letter from Chair Klaas Knot to G20 Finance Ministers and Central Bank Governors ahead of the G20 meeting on 24‑25 February. The letter notes the recent easing in global financial conditions but warns that, while expectations of a ‘soft landing’ for the global economy have grown, the outlook remains clouded by uncertainty. The letter sets out the FSB’s work priorities for 2023, which are: non-bank financial intermediation (NBFI); cryptoassets and DeFi; implementation of the Enhancing Cross-Border Payments Roadmap; cyber and operational resilience; and climate change.

The letter also introduces the reports the FSB is delivering to the February meeting:

  • The financial stability aspects of commodity markets, which forms part of the FSB’s work programme to strengthen the resilience of the NBFI sector. The report presents an overview of a few globally traded commodities markets that are of particular economic importance at the current juncture (crude oil, natural gas, and wheat) and examines their vulnerabilities, focusing on the mechanisms through which any further stresses in these markets could propagate more broadly through the financial system. The report also identifies a number of data gaps that hamper the assessment of vulnerabilities and transmission channels in the commodities sector.
  • The financial stability risks of DeFi, a fast-growing segment of the crypto-asset ecosystem. The report forms part of the FSB’s work programme, jointly with sectoral standard setters, for the delivery of a consistent and comprehensive regulatory framework for crypto-assets.
  • Priority actions for achieving the G20 targets for enhancing cross-border payments. The report contains a detailed set of next steps to achieve the G20 cross-border payments roadmap’s goals and is being accompanied by the establishment of two new taskforces to work in partnership with the private sector. [20 Feb 2023]
BIS: Bulletin on crypto shocks and retail losses 

BIS has published a bulletin on crypto shocks and retail losses. The bulletin examines

  • trading behaviour by large and small investors around the world during the Terra/Luna and FTX meltdowns;
  • whether users made or lost money on their investments on average; and
  • whether the market turmoil in crypto and DeFi in 2022 had any discernible effects on financial conditions in the broader financial markets outside the crypto universe. [20 Feb 2023]




HoC Library: Research briefing on cryptocurrencies

The House of Commons (HoC) Library has published a research briefing on cryptocurrencies. The briefing covers: the definition of cryptocurrencies; how they work; the benefits and challenges that they offer; and political and regulatory responses. [23 Feb 2023]

HMT: Speech to ABI on growth, competitiveness, reform of Solvency II & InsurTech

HM Treasury (HMT) has published a speech by Andrew Griffith, Economic Secretary, delivered at the Association of British Insurers’ (ABI) Annual Conference. In his speech, Mr Griffith spoke the work of HM Government (HMG) to promote growth and competitiveness in the insurance sector, including the reform of Solvency II. He also highlighted the importance of technological innovation in insurance. [22 Feb 2023]

FCA: Case study on innovation

The FCA has published a new webpage setting out as a case study the progress of a start-up which has worked with all three of its main innovation services – Innovation Pathways, Digital Sandbox and Regulatory Sandbox. [21 Feb 2023] 

FCA Consumer Duty - information for firms

The FCA has updated its Consumer Duty home page with links to recent communications to firms in particular sectors, including to those in the payments and e-money and consumer investments sectors. The letters provide a reminder of the implementation timeline and set out key elements of the Consumer Duty and how it applies to firms in the particular sector.  They include a summary of the FCA's expectations of firms' approach to embedding the Consumer Duty, including examples of good and poor practice drawn from the FCA's multi-firm work.  [20 Feb 2023]

FCA: DP on updating and improving the UK regime for asset management

The FCA has published Discussion Paper 23/2: Updating and improving the UK regime for asset management (DP23/2). The FCA's focus in DP23/2 is on identifying changes which would:

  • support the needs of investors, both domestic and international, and retail and professional;
  • enable technological development, innovation and better use of data;
  • ensure consistency with international standards and take account of rules in other jurisdictions, so that firms can continue to operate efficiently on a global basis; and
  • be effective and proportionate, simplifying and standardising requirements where possible.

DP23/2 is organised as follows:

  • Chapter 2 gives context about the UK asset management industry and explains the main outcomes the FCA wants to achieve.
  • Chapter 3 asks for feedback on whether the structure of the regulatory regime for asset managers could be made clearer and more coherent. It covers the framework of rules for asset managers, the regime for retail funds and the regime for managers of professional funds.
  • Chapter 4 sets out areas which the FCA thinks could be addressed to make the regime for asset management and funds work better. It mainly covers possible changes to the rules relating to fund managers, depositaries and funds.
  • Chapters 5 and 6 consider how technology can drive change, looking at how fund managers, distributors and investors interact with one another, and discuss structural changes such as fund tokenisation which could support better outcomes for firms and investors.

Feedback is requested by 22 May 2023. A Feedback Statement will be released later in 2023, possibly as part of a consultation paper on some of the discussion topics. [20 Feb 2023]

FCA: InvestSmart Campaign – targeting different groups

The FCA has published a new webpage, as part of its InvestSmart campaign, illustrating how it researchers types of investor and uses specific techniques to alert different groups of people to risks from investment offers. In this case, the FCA's example focuses on social media and digital technology, in particular the use of gamification techniques to encourage investor participation. The regulator explains how it has approached getting messages to 'at-risk' investors via digital advertising.

The FCA has also published its latest research on how investors are avoiding investment scams. [20 Feb 2023]





Further ASIC regulatory response on CHESS Replacement and ASX’s program capabilities

ASIC has issued notices to various ASX entities requiring them to produce two reports covering:

  • how they will respond to the findings and recommendations of a review by Accenture; and
  • their current portfolio, program and project management frameworks and an assessment of those frameworks against internationally recognised standards. [22 Feb 2023]


Hong Kong

Financial Secretary announces initiatives in 2023-24 Budget speech to further enhance Hong Kong as international financial centre

In his 2023-24 Budget speech, Hong Kong's financial secretary, Mr Paul Chan, set out his initiatives to further enhance Hong Kong as an international financial centre, among other areas.  The key initiatives relating to fintech include:

  • Virtual assets – Mr Chan will establish and lead a task force on virtual asset development (comprising members from relevant policy bureaux, financial regulators and market participants) to provide recommendations on the sustainable and responsible development of the sector.
  • Commercial data interchange – The interchange will be linked to the Consented Data Exchange Gateway developed by the Government at the end of this year, allowing financial institutions to obtain relevant data after receipt of their clients’ authorisation.
  • Nurturing talent – The Government will launch a fintech internship scheme for post-secondary students to gain practical work experience in fintech enterprises in Hong Kong or the wider GBA, and extend the pilot programme to enhance talent training for the insurance sector and the asset and wealth management sector for three years.

The SFC and the Insurance Authority have announced their support for the measures proposed by Mr Chan.  Further information on the Budget can be found here.  [22 Feb 2023]



SFC launches consultation on proposed requirements for operators of VA trading platforms, including proposals to allow such operators to serve retail investors

The SFC has launched a consultation on proposed requirements for operators of virtual asset (VA) trading platforms.  Feedback on the proposals is required by 31 March 2023.

Following the passage of amendments to the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO) by the Legislative Council in December 2022, the new licensing regime for centralised VA trading platforms trading non-security tokens will come into effect on 1 June 2023 (see our previous update).  All centralised VA trading platforms carrying on their businesses in Hong Kong, or actively marketing their services to Hong Kong investors, will need to be licensed and regulated by the SFC.

The key proposals under the present consultation include (among others):

  • Detailed regulatory requirements to be set out in the new Guidelines for Virtual Asset Trading Platform Operators, based on the requirements of the existing regime under the Securities and Futures Ordinance (these include proposals to allow retail access to licensed VA trading platforms, as well as requirements relating to areas such as onboarding, governance, token due diligence and admission, disclosure, and insurance);
  • Adding a new Chapter 12 to the existing Guideline on Anti-Money Laundering and Counter-Financing of Terrorism (For Licensed Corporations) which sets out the requirements relating to the business activities of licensed VA trading platform operators (such as those relating to VA transfers);
  • Publishing disciplinary fining guidelines for the new licensing regime under the AMLO.

The consultation paper also sets out proposed transitional arrangements to allow reasonable time for existing VA trading platforms to either apply for a licence or arrange for an orderly closure of their business in Hong Kong.  The SFC plans to publish lists on its website to inform the public of the different regulatory statuses of VA trading platforms.

VA trading platforms (together with their proposed responsible officers and licensed representatives) should apply for approvals under both the existing SFO regime and the new AMLO regime, given that a VA's classification may change from a non-security token to a security token (or vice versa) due to changes in its features over time.  They are also required to engage an external assessor in the application process.  [20 Feb 2023] 





MAS: Launch of real-time payments between Singapore and India

MAS and the Reserve Bank of India (RBI) have launched the linkage between Singapore’s PayNow and India’s Unified Payments Interface (UPI). This will enable customers of participating financial institutions in Singapore and India to send and receive funds between bank accounts or e-wallets across the two countries in real-time. They can do this using just the mobile phone number, UPI identity, or virtual payment address (VPA). The linkage provides customers with a safe, simple, and cost-effective way to make cross-border fund transfers.

MAS has also published the remarks by Prime Minister Lee Hsien Loong delivered at the launch event. [21 Feb 2023]




BNM: Exposure draft on e-KYC

Bank Negara Malaysia (BNM) has published an exposure draft on electronic know-your-customer (e-KYC) solutions. The draft sets out the proposed enhanced requirements and guidance in implementing e-KYC solutions for the on-boarding of individuals and legal persons. Feedback is requested by 2 May 2023. [23 Feb 2023]




SEBI advisory – Cybersecurity best practices

SEBI has issued an advisory to SEBI regulated entities (REs) regarding cybersecurity best practices. In introducing the best practices, SEBI comments on the increasing frequency and sophistication of cyber incidents and notes the interconnectedness of, and interdependencies between, financial entities.  As such, the Financial Computer Security Incident Response Team  (CSIRT-Fin)  has made a number of recommendations in a report to SEBI; in turn, SEBI has included applicable recommendations in the form of the advisory as an annex to the advisory. The advisory is to be read in conjunction  with other applicable SEBI circulars; the advisory is effective immediately.  [22 Feb 2023]

India and Singapore launch cross-border payment linkage

India and Singapore have launched a cross-border linkage between their respective Fast Payment Systems, India's Unified Payments Interface (UPI) and Singapore's PayNow. The facility was launched through token transactions by RBI Governor, Shri Shaktikanta Das and MAS Managing Director, Mr Ravi Menon using the UPI-PayNow linkage.

The UPI-PayNow linkage will enable users of the two fast payment systems in either country to make convenient, safe, instant, and cost-effective cross-border funds transfers using their respective mobile apps. Funds held in bank accounts or e-wallets can be transferred to / from India using just the UPI-id, mobile number, or Virtual Payment Address (VPA).  [21 Feb 2023]

RBI Occasional Papers – Banks' pensions liabilities, bank mergers, geopolitics, blockchain

The RBI has released its research journal: RBI - Occasional Papers - Vol. 43, No.1, 2022. The journal contains a number of articles, including one on the sensitivity of banks' pension liabilities to various actuarial assumptions and one examining whether bank mergers improve efficiency. There are also three book reviews, including of Geopolitics, Supply Chains, and International Relations in East Asia, edited by Etel Solingen and of Chain Reaction: How Blockchain Will Transform the Developing World written by Paul Domjan, Gavin Serkin, Brandon Thomas and John Toshack. [20 Feb 2023]




Agencies issue joint statement on liquidity risks resulting from crypto-asset market vulnerabilities

Federal bank regulatory agencies have published a joint statement highlighting liquidity risks to banking organizations associated with certain sources of funding from crypto-asset-related entities and some effective practices to manage those risks. The joint statement highlights key liquidity risks and some effective practices to monitor and appropriately manage those risks. The statement reminds banking organizations to apply existing risk management principles; it does not create new risk management principles. [23 Feb 2023]

SEC charges NBA player for unlawfully touting and making misleading statements about crypto security

The SEC has announced charges against former NBA player Paul Pierce for touting EMAX tokens, crypto asset securities offered and sold by EthereumMax, on social media without disclosing the payment he received for the promotion and for making false and misleading promotional statements about the same crypto asset.

The SEC’s order finds that Pierce failed to disclose that he was paid more than $244,000 worth of EMAX tokens to promote the tokens on Twitter. The SEC’s order also finds that Pierce tweeted misleading statements related to EMAX, including tweeting a screenshot of an account showing large holdings and profits without disclosing that his own personal holdings were in fact much lower than those in the screenshot. Pierce has agreed to settle the charges and pay $1.409 million in penalties, disgorgement, and interest. [17 Feb 2023]

SEC charges Terra founder Do Kwon with fraud

The SEC has charged crypto-asset developer Do Kwon and his company Terraform Labs with defrauding investors of billions of dollars, according to a federal court filing. According to the SEC’s complaint, from April 2018 until the scheme’s collapse in May 2022, Terraform and Kwon raised billions of dollars from investors by offering and selling an inter-connected suite of crypto asset securities, many in unregistered transactions. The SEC’s complaint alleges that Terraform and Kwon marketed crypto asset securities to investors seeking to earn a profit, repeatedly claiming that the tokens would increase in value but in fact this was not the case. The complaint charges the defendants with violating the registration and anti-fraud provisions of the Securities Act and the Exchange Act. [16 Feb 2023]




Ukraine-related sanctions information

Regular updates on sanctions and other developments that may impact businesses with interests or operations in Ukraine and/or Russia are available on our FSR and Corporate Crime Notes blog here.



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Karen Anderson

Consultant, London

Karen Anderson
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Cat Dankos

Regulatory Consultant, London

Cat Dankos

Key contacts

Karen Anderson photo

Karen Anderson

Consultant, London

Karen Anderson
Cat Dankos photo

Cat Dankos

Regulatory Consultant, London

Cat Dankos
Karen Anderson Cat Dankos