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In this regular post, we round-up FinTech-related financial services regulatory developments for the week ending 16 February 2024.




DSIT: Letter to FCA and BoE on AI regulation update

Following the release of HM Government's (HMG's) response to its white paper on the regulation of artificial intelligence (AI) in early February, the letters sent by the Secretary of State and the Economic Secretary to the Treasury and City Minister to the FCA and the BoE to ask the regulators to publish an update on their AI strategies by 30 April 2024 have been published.  [16 Feb 2024]


FCA: Financial promotions data for 2023 and Q4 2023

The FCA has released its 2023 financial promotions data and Q4 2023 financial promotions quarterly data.  Following FCA intervention, over 10,000 financial adverts and other promotions issued by authorised firms were withdrawn or changed in 2023, an increase of 16.6%, year-on-year. In relation to unauthorised firms and individuals, the FCA issued 2,285 alerts, up from 1,800 in 2022.

After being given new powers by HM Government (HMG), the FCA explains that it has focused on illegal cryptoasset promotions to UK consumers, issuing 450 consumer alerts between 8 October 2023 and 31 December 2023.

The FCA states that it remains concerned about the levels of compliance with financial promotions rules. [14 Feb 2024]


Lords: Answer to written questions on cryptocurrencies – retail trade

For HM Treasury (HMT), Baroness Vere of Norbiton, has provided a written statement in response to the question posed by Lord Taylor of Warwick, on the consideration given by HMT to approving retail access to cryptocurrency exchange traded products (ETPs).

The response explains that the approval of ETPs that reference specific cryptoassets is a matter for the FCA as the independent regulator, and that the FCA currently considers these products to be ill-suited for retail consumers – due to risk of harm arising from the nature of the underlying assets and markets. The response also notes, however, that the FCA’s prohibition of crypto-referenced ETPs is subject to on-going review. [14 Feb 2024]


FSCP: Responses to BoE's and FCA's CPs and DPs on cryptoassets and digital currency

The Financial Services Consumer Panel (FSCP) - one of the statutory panels established under the Financial Services and Markets Act 2000 (FSMA 2000) which advises and challenges the FCA in relation to the regulator's statutory duty - has published its responses to the following consultation papers (CPs) and Discussion Papers (DPs):

  • Bank of England (BoE) and HM Treasury (HMT) CP on Regulatory regime for systemic payment systems using stablecoins – the response asserts the FSCP's belief that the Payment System, including all regulated stablecoins, not just systemic ones, must be guided by the principles of: accessibility; fairness and affordability; reliability and resilience; safety, security and consumer protection; and transparency. The response also notes the FSCP's concern regarding the concept of these ‘systemic’ boundaries, whereby the BoE's regulatory remit under the Financial Services and Markets Act 2023 (FSMA 2023) will apply only when such providers have been recognised by HMT.
  • FCA DP – Regulating Cryptoassets Phase 1: Stablecoins – the response echoes the above response regarding distinguishing between systemic and non-systemic forms of money and payment systems, and additionally expresses concern that a ‘halo’ effect may be given to these novel products by regulation which will require careful monitoring.
  • FCA CP23/29 Access to Cash – the response covers the FSCP's views on scope; the importance of small and medium-sized enterprises (SMEs) in keeping the cycle of cash flowing; triggers; cash access assessments; keeping consumers informed; effective monitoring and smart use of data; and consumer redress. [12 Feb 2024]

#Crypto #Stablecoins


EP: ECON votes on payment services – Better access to cash and protection against fraud and hidden charges

The European Parliament (EP) has announced that the Economic and Monetary Affairs Committee (ECON) has voted to adopt changes to payment services legislation.

Among other matters, the provisions agreed by the MEPs on ECON include requiring payment service providers (PSPs) which fail to have in place the appropriate fraud preventing mechanisms to be responsible for covering customer’s losses resulting from fraud. Technical service and IT solution providers could also be held responsible for damages (up to the transaction amount) caused by a failure, within the remit of their contract. Finally, online platforms would be liable if they were informed about fraudulent content on their platform and did not remove it.

The new text will also expand the right to refund to cases of 'spoofing' where fraudsters pretend to be from a customer’s bank; MEPs extended that right to cases where fraudsters pretend to be from other types of organisation.

In terms of next steps, plenary vote is expected in April. Negotiations between Parliament and Council are then expected to start after the elections. [14 Feb 2024]


ESMA: Newsletter – January 2024 Spotlight on markets

ESMA has published its latest edition of the Spotlight on Markets newsletter. This edition covers ESMA's recent work, including: the launch of two consultation papers (CPs) on guidelines under the Markets in Crypto Assets Regulation (MiCAR); and raising awareness of the requirements which apply when posting investment recommendations on social media. [13 Feb 2024]

#Crypto #SocialMedia


APRA’s Opening Statement to Senate Economics Legislation Committee – February 2024

In his opening statement to the Senate Economics Legislation Committee, John Lonsdale, Chair of the Australian Prudential Regulation Authority (APRA), has outlined APRA’s work protecting the financial wellbeing of the Australian community. Among other things, he noted the increasing number of cyber-attacks and scams. [14 Feb 2024]


Hong Kong

SFC and Police warn public of suspicious virtual asset-related fraud

The SFC and the Police have issued a warning to the public regarding a suspected fraud involving an entity purporting to be a virtual asset trading platform (VATP) and operating under the name of 'MEXC' with various websites.

The SFC has posted MEXC and its websites on the 'Suspicious Virtual Asset Trading Platforms Alert List'.  While the Police has taken steps to block MEXC's websites, the public should beware of websites with similar domain names which may be continuously created by MEXC.

The SFC and the Police have been sharing intelligence on this case under the joint working group that monitors and investigates illegal activities relating to VATPs (established in September 2023 – see our previous update).

MEXC is suspected to have enticed victims to join social media or instant messaging chat groups on the pretence of offering free investment advice.  In these chat groups, victims interested in buying cryptocurrencies were referred to websites operated by MEXC.  Victims were then asked to deposit funds into designated bank accounts for investment purposes but would subsequently report difficulties with fund withdrawal.

The SFC reminds the public to stay vigilant against fraud when making investment decisions, such as when encountering investment opportunities and advice on social media platforms or instant messaging apps.  Unlicensed platforms will often adopt names similar to those of legitimate entities to confuse investors.  [9 Feb 2024]

#Crypto #VATPs  #SocialMedia


New OJK Regulation: Consumer and Public Protection in Financial Services Sector

The Indonesian Financial Services Authority (OJK) issued OJK Regulation No. 22 of 2023 on Consumer and Public Protection in the Financial Services Sector (Regulation 22/23, in Indonesian language), which revokes OJK Regulation No. 6/POJK.07/2022 (in Indonesian language) and several other provisions in various OJK Regulations.

Regulations 22/23 includes express prohibition for financial institutions in cooperating with parties that conduct unlicensed business activities in the financial sector. If the cooperation has been entered into, then such financial institutions are required to terminate such cooperation with the unlicensed counterparty. This prohibition is exempted for the counterparties which are currently in the licensing process with OJK (eg under OJK regulatory sandbox process).

Additionally, from a technology perspective, Regulation 22/23 further clarifies the authority of OJK in supervising entities who carry out financial sector technology innovation activities, which cover the settlement of commercial paper transaction (among others clearing, settlement, recording and custody of securities in capital market), securities crowdfunding, technology innovation in investment management and risk management, peer-to-per lending, market support (including data collection), activities related to digital financial assets (including crypto assets), and other digital financial services (FS) activities.

Regulation 22/23 came into effect on 22 December 2023. [16 Feb 2024]

#Crowdfunding #Crypto


BOT signs MoU with TikTok to promote financial literacy and awareness

The Bank of Thailand (BOT) and TikTok have signed a Memorandum of Understanding (MoU) to promote public knowledge and understanding on economic and financial matters. This collaboration will enable the BOT's financial literacy information, as well as information relating to scams and fraud, to be disseminated more widely. [9 Feb 2024]

#FinancialLiteracy #SocialMedia


RBI: Governor holds meetings with MDs and CEOs of private and public sector banks

The Reserve Bank of India (RBI) has announced that its Governor has held meetings with the managing directors (MDs) and chief executive officers (CEOs) of public sector banks and select private sector banks as part of the RBI's continuous interaction with the senior management (SM) of its regulated/supervised entities.

Among other things, the Governor highlighted various issues, including IT and cyber security preparedness; operational resilience; digital frauds; and strengthening of the internal rating framework. He also stressed that customer grievance redress mechanism and protection of customers’ interests are of paramount importance for the safety and stability of the financial system and that of individual financial institutions.  [14 Feb 2024] 

#Cyber #DigitalFraud

SEBI issues warning to customers regarding unregulated entities

SEBI has issued a notice warning customers of the dangers of dealing with unregistered entities. The notice explains that SEBI has observed a rising trend of unscrupulous entities and online platforms that falsely claim to be registered with SEBI as intermediaries and often entice customers by showcasing fake certificates purportedly issued by SEBI.

The notice cautions investors against placing their money with any entity based on such claims and urges investors to conduct due diligence and verify the registration status of any entity claiming to be a SEBI-registered intermediary. [13 Feb 2024] 


RBI: Launch of RuPay and UPI

The RBI has announced the launch of RuPay cards and Unified Payments Interface (UPI) connectivity between India and Mauritius, as well as UPI connectivity between India and Sri Lanka. This connectivity enables an Indian traveller to Mauritius to pay a merchant in Mauritius using UPI. Similarly, a Mauritian traveller will be able to do the same in India using the Instant Payment System (IPS) app of Mauritius. Further, with the adoption of RuPay technology, the MauCAS card scheme of Mauritius will enable banks in Mauritius to issue RuPay cards domestically, which can be used at ATMs and point of sale (PoS) terminals locally in Mauritius as well as in India. With this, Mauritius becomes the first country outside Asia to issue cards using RuPay technology. Indian RuPay cards would also be accepted at ATMs and PoS terminals in Mauritius.

The digital payments connectivity with Sri Lanka will enable Indian travellers to make QR code-based payments at merchant locations in Sri Lanka using their UPI apps. [12 Feb 2024]

#RuPay #UPI #Payments


BSP: Campaign for digitalisation of government financial transactions

The Bangko Sentral Ng Pilipinas (BSP) has announced that it has intensified its campaign towards the digitalisation of government transactions. The purpose of the campaign is to facilitate and secure the delivery of various financial services from the government. These include pensions, social security benefits, loans and assistance from the Pantawid Pamilyang Pilipino Program (4Ps).

According to the latest BSP data, government agencies are at the forefront of the country's goal of becoming 'cash-lite'. [14 Feb 20]



SEC Chair comments on AI and finance

The SEC has published the remarks made by Chair Gary Gensler, delivered in a personal capacity rather than on behalf of the SEC, at Yale Law School.  The focus of Chair Gensler's remarks was the opportunities and challenges presented by artificial intelligence (AI).  At the start of his speech, he summarised the overall challenges as follows: "AI also raises a host of issues that aren’t new but are accentuated by it. First, AI models’ decisions and outcomes are often unexplainable. Second, AI also may make biased decisions because the outcomes of its algorithms may be based on data reflecting historical biases. Third, the ability of these predictive models to predict doesn’t mean they are always accurate."  Chair Gensler then moved to discuss matters in the financial context in more detail. At the macro-level he spoke about system-wide risk and, at the micro-level, manipulation, AI washing, hallucinations and conflicts of interest.  [13 Feb 2024]


SEC announces settlement with 16 firms in relation to 'off-channel' communications

The SEC has announced its settlement with five broker-dealers, seven dually registered broker-dealers and investment advisers, and four affiliated investment advisers in relation to failures to maintain and preserve electronic communications. One of the firms paid a lower share of the overall penalty, reflecting its voluntary self-reporting to, and cooperation with, the SEC.

Specifically, the SEC’s investigations uncovered pervasive and longstanding uses of unapproved communication methods, known as off-channel communications, at all 16 firms. The firms did not maintain or preserve the substantial majority of these off-channel communications, in violation of the federal securities laws.

The firms admitted the facts set forth in their respective SEC orders, acknowledged that their conduct violated recordkeeping provisions of the federal securities laws, agreed to pay combined civil penalties of more than $81m, and have begun implementing improvements to their compliance policies and procedures.  [9 Feb 2024]




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Cat Dankos

Regulatory Consultant, London

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