In this regular update, we round-up FinTech-related financial services regulatory developments for the week ending 2 September 2022.
Recent updates from Herbert Smith Freehills include:
- The IP in NFTs – Strategies for protecting your brands and products in the metaverse
- The Law Commission digital assets consultation – a proposal for property rights reform
- A new regime for critical third party providers to UK financial services firms is on the horizon
FSB Secretary General: Making the most of digital payments
The Financial Stability Board (FSB) has published a speech, delivered by Dietrich Domanski, the Secretary General of the FSB in Frankfurt, Germany. In his speech, Mr Domanski discussed the role of financial regulation in promoting efficient and safe cross-border digital payments.
Concluding his address, Mr Domanski advised that the FSB will report to the G20 Finance Ministers and Central Bank Governors in October 2022 on regulatory and supervisory approaches to stablecoins and other crypto-assets. At that time, the FSB also will consult on a review of its high-level recommendations for the regulation, supervision and oversight of GSC arrangements, including how existing frameworks may be extended to close gaps and implement the high-level recommendations. Additionally, the FSB plans to consult on its proposed recommendations for promoting international consistency of regulatory and supervisory approaches to other crypto-assets and crypto-asset markets and strengthening international cooperation and coordination. [1 Sep 2022]
FCA: Occasional Paper on robo-advice for borrower repayment decisions
The FCA has published an Occasional Paper on robo-advice for borrower repayment decisions. The paper explains the results from a robo-advice experiment that asked consumers to make hypothetical borrower repayment decisions. The paper sets out the following key findings.
ASIC warns brokers considering high-risk offers to retail investors
ASIC has warned brokers to reconsider high-risk products and services to retail investors where the true cost is masked. Due to the decrease in retail investor activity, some brokers are looking to offer retail investors high-risk products or services, such as (1) securities lending, (2) crypto-assets, and (3) 'zero' and 'low-cost' brokerage. These products can be inappropriate and result in poor outcomes for retail investors.
ASIC also reminded licensees to supervise their authorised representatives, particularly online-only brokers. [31 Aug 2022]
HKMA sets out supervisory expectations relating to adoption of cloud computing
The HKMA has issued a circular to provide guidance to authorised institutions (AIs) on its supervisory expectations relating to the adoption of cloud computing. This is in light of the growing trend of AIs adopting cloud computing via third-party cloud service providers (CSPs).
The HKMA's supervisory expectations are developed with reference to the results of a round of thematic examinations undertaken from 2021 to 2022. The principles serve to complement (and should be read in conjunction with) the relevant existing HKMA guidance, including supervisory policy manual module SA-2 (Outsourcing), module OR-2 (Operational Resilience) and module TM-G-1 (General Principles for Technology Risk Management). AIs should apply the guidance in a proportionate manner and in a way that is commensurate with the criticality of their cloud adoption and potential impact on their risk profiles.
The key principles include:
MAS and BI announce work on cross-border QR code payments connectivity
Bank Indonesia (BI) and MAS have announced the commencement of work on a cross-border QR payment linkage between Indonesia and Singapore as part of the ASEAN-wide payments connectivity effort. This linkage, which is targeted to be launched in the second half of 2023, will allow users to make instant, secure, and efficient retail payments by scanning the QRIS (Quick Response Code Indonesian Standard) or NETS QR codes displayed by merchants. [29 Aug 2022]
MAS MD on digital assets innovation
MAS has published the opening address delivered by Ravi Menon, Managing Director, at the Green Shoots Seminar. Under the title of 'Yes to Digital Asset Innovation, No to Cryptocurrency Speculation', Mr Menon explained: the complexities of the digital asset ecosystem and its different; what MAS is actively promoting; what MAS is discouraging; and what are the risks MAS is seeking to manage. [29 Aug 2022]
BSP champions SupTech and RegTech for cyber resilience
In a press release, Bangko Sentral ng Pilipinas (BSP) highlighted its support for industry initiatives to further enhance cyber resilience. The BSP explains that it has recently completed the Advanced SupTech Engine for Risk-Based Compliance (ASTERisC*), which will soon be deployed among selected BSP Supervised Financial Institutions (BSFIs). ASTERisC* is a unified regulatory and supervisory technology (RegTech and SupTech) solution that streamlines and automates regulatory supervision, reporting, and compliance assessment of BSFIs' cybersecurity risk management.
As Lead Computer Emergency Response Team (CERT) covering all BSFIs, the BSP will be issuing the Financial Services Cyber Resilience Plan, spearheaded by its Financial Supervision Sector – Technology Risk and Innovation Department. The plan, which will serve as the primary framework for policies and strategies to strengthen cyber defense in the financial services industry, is expected to bolster the regulatory and supervisory environment for cyber security. [31 Aug 2022]
Fed updates FedNow service timing to mid-2023
The US Federal Reserve (Fed) has announced plans to launch its instant payments system for banks, the "FedNow" service, between May and July 2023. The FedNow service will allow banks to instantly transfer payments across the financial system. Currently, more than 120 organizations are participating in the FedNow Pilot Program. The Fed Vice Chair, Lael Brainard, has said that the testing on the system will begin in mid-September. [29 Aug 2022]
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