The following posts provide a snapshot of selected UK, EU and global wholesale financial regulatory developments of interest to banks, investment firms, broker-dealers, market infrastructures, asset managers and corporates.
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UK Joint Money Laundering Steering Group Proposed Cryptoasset Travel Rule Guidance
08/14/2023
The U.K. Joint Money Laundering Steering Group opened a consultation on July 28, 2023 on guidance on the U.K. travel rule for cryptoasset transfers. The Money Laundering and Terrorist Financing (Amendment) (No. 2) Regulations 2022 introduced the cryptoasset travel rule by amending the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, and firms will need to comply with the requirements from September 1, 2023. The travel rule requires certain identification information on the sender (originator) and recipient (beneficiary) to accompany a transfer of a cryptoasset. The JMLSG is proposing to add a new annex setting out guidance on the U.K. travel rule for cryptoassets, covering scope, information requirements, batch transfers, returns, unhosted wallet transfers, wallet attribution, linked transactions and use of a layer-2 solution such as the Lightning Network. The guidance also states that firms should consider communications from the Financial Conduct Authority on the sunrise issue, which refers to the impact of jurisdictions implementing the travel rule at different times. Firms may encounter issues when dealing with counterparties in jurisdictions that have not implemented the travel rule for cryptoassets, for example, when dealing with EU counterparties for which the EU travel rules for cryptoasset transfers will only apply from December 30, 2024. Responses to the JMLSG consultation may be submitted until August 25, 2023.ATTORNEYS: Barnabas W.B. Reynolds, Sandy Collins
TOPICS : AML/CTF, Insider Trading and Sanctions, FinTech, Payment Services -
Financial Stability Board Issues Recommendations for Regulating Cryptoasset Activities and Markets
08/14/2023
The Financial Stability Board has finalized its global regulatory framework for cryptoasset activities and markets and revised the framework for global stablecoin arrangements. Both frameworks, based on the principle of "same activity, same risk, same regulation" aim to provide a basis for consistent regulation across the globe that is proportionate to the risks.
Comprising nine high-level recommendations for the regulation, supervision and oversight of cryptoasset activities and markets, the cryptoasset framework sets out the key objectives for implementation of an effective regulatory and supervisory regime for mitigating the risks posed by cryptoassets. The recommendations are:
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HM Treasury Publishes Response to Payments Regulation and Systemic Perimeter Consultation
08/14/2023
HM Treasury has published a response to its consultation on payments regulation and the systemic perimeter. The consultation was prompted by the U.K. government's Payments Landscape Review and HM Treasury's concern that some payments services operators were not subject to systemic supervision but may pose systemic risks to the U.K. financial system.
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HM Treasury Consults on UK Future of Payments Review
08/04/2023
HM Treasury has published a Call for Input on the U.K. Future of Payments Review, an investigation into how future payments are likely to be made and how the U.K. can offer world-leading retail payments. The review is focused on consumer needs — specifically, those of individuals and businesses processing retail payments. Input is sought on the following issues:- What are the most important consumer retail payment journeys, both today and in the next five years?
- How does the experience of these journeys by U.K. consumers (individuals and businesses) compare with those of other leading countries?
- How likely are the existing plans and initiatives across the payments landscape to deliver world-leading payment journeys for U.K. consumers?
ATTORNEYS: Barnabas W.B. Reynolds, Chloe Barrowman
TOPICS : Brexit for Financial Services, Consumer Protection, Payment Services -
EU Travel Rule for Crypto-Assets Set to Apply from January 2025
05/02/2023
On April 20, 2023, the European Parliament announced that it had formally endorsed the draft Regulation on information accompanying transfers of funds and crypto assets (referred to here as the EU Travel Rule Regulation). The draft Markets in Crypto-Assets (MiCA) Regulation has also been adopted.
The existing EU Wire Transfer Regulation (EU WTR) requires EU Payment Service Provider to ensure that information on the payer and the payee accompanies a transfer of funds. The funds can be in any currency, and comprise banknotes and coins, scriptural money and electronic money.
The EU Travel Rule Regulation will extend the requirements to crypto assets and crypto-asset services providers (CASPs), (both as defined under the draft MiCA Regulation) with information on the originator and the beneficiary being required to accompany any transfers in crypto assets, regardless of whether they are domestic or cross-border. The requirements will not apply to person-to-person transfers of crypto assets where a CASP is not involved, or when both the originator and the beneficiary are providers of crypto-asset transfers acting on their own behalf.
The EU Travel Rule Regulation must still be published in the Official Journal of the European Union before it comes into effect. This is likely to be around July this year. At that time, the EU Travel Rule Regulation will repeal the EU WTR, however, the existing requirements on information accompanying transfers of funds will carry over to the new Regulation. The EU Travel Rule Regulation will apply from the same date that the MiCA Regulation applies, which is expected to be January 2025.ATTORNEYS: Thomas Donegan, Sandy Collins
TOPICS : AML/CTF, Insider Trading and Sanctions, FinTech, Payment Services -
UK Government Publishes its Proposals for Cryptoasset Regulation
02/14/2023
The U.K. government has published its much-anticipated proposals for regulating the cryptoasset industry. These proposals, currently in the form of a consultation, will see many (but not all) cryptoasset-related activities being brought within the regulatory perimeter for financial services in the U.K. The consultation is extensive, covering the main elements of a new regime for cryptoasset issuance and disclosure, trading, custody and lending, as well as a proposed market abuse framework for cryptoassets.
The consultation closes on 30 April 2023. The government will publish its response once it has analysed the feedback, which will be followed by legislation being put before Parliament. The Financial Conduct Authority will consult on its proposed detailed rules once the legislation has been published.
The government has also announced a significant change to its earlier communicated approach to the regulation of cryptoasset financial promotions. Previously, such promotions could be issued only by regulated financial institutions. The changes will mean that those cryptoasset businesses that are registered with the FCA for the purposes of anti-money laundering compliance will be able to communicate their own financial promotions in relation to qualifying cryptoassets.
We discuss these proposals in detail in our client note, "UK Proposals for Cryptoasset Regulation". -
UK Law Commission Consults on Law Reforms for Digital Assets
07/28/2022
Following the Call for Evidence on digital assets in 2021, the U.K. Law Commission has issued a consultation on proposals to reform the law of England and Wales to recognize and protect the rights of users of digital assets. The Law Commission believes that the law of England and Wales is sufficiently resilient, flexible and iterative to adapt to digital assets, including cryptoassets and stablecoins. However, the law Commission considers that law reforms are needed to ensure that digital assets gain from consistent legal recognition and protection. Responses to the consultation may be submitted until November 4, 2022.
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UK Regulators Propose Requirements for Critical Third Parties' Services to UK Regulated Firms
07/21/2022
The Bank of England, Prudential Regulation Authority and Financial Conduct Authority (together, the supervisory authorities) have published a discussion paper proposing measures to supervise and enhance the resilience of critical third parties (CTPs) to the U.K. financial sector. Responses to the discussion paper may be submitted until December 23, 2022. The supervisory authorities intend to consult on proposed requirements for CTPs in 2023.
Currently, the supervisory authorities' direct powers over entities providing critical services to U.K. authorized firms, their service providers (authorized e-money institutions, payment institutions and registered account information services) and financial market infrastructures (together, U.K. regulated firms) are limited. The Financial Services and Markets Bill, introduced to Parliament yesterday, would grant HM Treasury and the supervisory authorities' new express powers to oversee such third parties. HM Treasury will be able to designate an entity as a CTP if it provides services to U.K. regulated firms and its failure would pose financial stability or confidence risk to the U.K.
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UK Proposals for Regulating Systemic Payment Activities
07/21/2022
HM Treasury has opened a consultation on payments regulation and the systemic perimeter. The consultation arose out of the Payments Landscape Review and the government’s commitment to consult on bringing systemically important entities within payment chains under Bank of England regulation. Market developments and innovation have changed how risks are dispersed across payment networks. It is therefore likely, according to HM Treasury, that some entities operating in the payments space are not subject to systemic supervision by the Bank of England and as a result pose systemic risks to the U.K. financial system or even to those entities that are subject to Bank of England supervision. This consultation makes various proposals to address such risks or issues. Responses to the consultation may be submitted until October 11, 2022. The government will respond to that feedback in 2023.
Read more.ATTORNEYS: Sandy Collins, Thomas Donegan
TOPICS : Financial Market Infrastructure, FinTech, Payment Services -
UK Government Publishes Financial Services and Markets Bill
07/20/2022
The U.K. government has published the much anticipated Financial Services and Markets Bill. Following its exit from the EU, the U.K. has undertaken a fundamental review of how financial regulation policy and rules should be made, reviewed and established in law, particularly in light of the return of the U.K.'s sovereignty. Furthermore, there has been a substantial assessment of the U.K.'s financial services rules and regulations, with some areas warranting further consideration. The Bill implements the outcomes of the Future Regulatory Framework Review, which assessed whether the U.K. financial services regulatory framework is fit for purpose and able to support future growth, particularly in light of challenges such as Brexit and climate change. On the same day, HM Treasury published its response to the final consultation in the FRF Review. The FSM Bill establishes a revised blueprint for financial services regulation by revamping the existing model under the Financial Services and Markets Act 2000 and revoking retained EU law in financial services. The regulators will be delegated powers for detailed rulemaking, and as a result, become subject to enhanced Parliamentary oversight.
Read more.ATTORNEYS: Sandy Collins, Barnabas W.B. Reynolds
TOPICS : Brexit for Financial Services, FinTech, MiFID II, Payment Services, Securities -
Crypto-Asset Market Turmoil: Financial Stability Board Issues Statement
07/11/2022
The Financial Stability Board has issued a statement on international regulation and supervision of crypto-asset activities. The statement is made in light of the crypto-asset market turmoil. The statement warns crypto-asset service providers to comply with existing legal obligations in the countries in which they operate, which would include anti-money laundering obligations. FSB members are implementing the Financial Action Task Force's recommendations for crypto-asset service providers to be registered for AML purposes and to comply with the so-called travel rule, which requires relevant originator and beneficiary information to accompany crypto-asset transactions.
The FSB reiterates that an effective regulatory framework should adopt the "same risk, same outcome/regulation" approach. The FSB is progressing work with other international standard-setting bodies to tackle potential financial stability risks presented by crypto-assets, including stablecoins. This includes reviewing existing applicable standards, identifying gaps, and adjusting those standards or developing new standards. The FSB's view is that stablecoins that are used as a means of payment potentially present significant risks to financial stability and should be subject to robust regulations and supervision, including transparency obligations and, importantly, holding sufficient reserves to mitigate financial stability risks. The FSB will report to the G20 Finance Ministers and Central Bank Governors in October this year on the adoption of regulatory approaches to stablecoins. -
UK Treasury Committee Makes Recommendation for Future Regulatory Framework Review
06/16/2022
The House of Commons Treasury Committee has published a report on the Future of Financial Services Regulation setting out its view on the priorities for regulatory change in the U.K. now that the U.K. has left the EU. The report considers some of HM Treasury's proposals in the Future Regulatory Framework Review and presents its related recommendations. It also makes specific recommendations for the Financial Conduct Authority and the Prudential Regulation Authority.
Read more.ATTORNEYS: Thomas Donegan, Sandy Collins
TOPICS : Bank Prudential Regulation & Regulatory Capital, Financial Services, FinTech, Payment Services -
UK Money Laundering Regulation Changes Announced for September 2022
06/15/2022
Following its 2021 consultation on targeted amendments to the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (the MLRs), the U.K. government has published a consultation response which summarises the feedback to the consultation and sets out the government's approach to making changes to the statutory instrument. The amendments will be made in the draft Money Laundering and Terrorist Financing (Amendment) (No. 2) Regulations 2022, which are intended, for the most part, to take effect from September 1, 2022. A summary of the changes is set out below. The government will also soon publish its response to the call for evidence on the U.K.'s anti-money laundering and counter terrorist financing regulatory and supervisory regime, which covered the overall effectiveness and extent of the regime, whether key elements operate as intended, and the structure of the supervisory regime.
Read more.ATTORNEYS: Thomas Donegan, Sandy Collins
TOPICS : AML/CTF, Insider Trading and Sanctions, FinTech, Payment Services -
UK Government Consults on Managing Systemic Stablecoin Firm Failures
05/31/2022
HM Treasury has opened a consultation on managing the failure of systemic digital settlement asset firms, including stablecoin firms. In April 2022, the U.K. government confirmed that it will bring the issuing of or the facilitating of the use of stablecoins used as a means of payment into the U.K. regulatory perimeter. Issuers of stablecoins for payments as well as other entities providing related services, including wallet providers and firms providing custody services, will be subject to regulation by the Financial Conduct Authority. The government also noted that, to manage the failure of systemic stablecoin firms, it would be considering extending the definition of a payment system to include arrangements that facilitate or control the transfer of "digital settlement assets" (DSAs). Such firms that are deemed systemically important will also be subject to supervision by the Bank of England, meaning that they will be authorized by the FCA and recognized by the Bank of England, and the Bank will be the lead prudential regulator.
Read more.ATTORNEYS: Barnabas W.B. Reynolds, Sandy Collins
TOPICS : FinTech, Payment Services, Recovery & Resolution -
Access to Cash Designation Measures Confirmed
05/19/2022
HM Treasury has published a summary of responses it received to its consultation on protecting access to cash across the U.K. In the response, HM Treasury confirms that it will be proceeding with the proposal to designate which firms will have obligations to ensure reasonable access to withdrawal and deposit facilities for individuals and reasonable access to deposit facilities for SMEs. The measures will be provided for in the Financial Services and Markets Bill, which was announced in the Queen's Speech.
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Government Details Proposed Financial Services and Markets Bill
05/10/2022
Following the Queen's speech yesterday, the government has published a briefing pack setting out details of the bills that it intends to introduce, including the so-called Brexit Freedoms Bill as well as key legislation relevant to financial services. The government will introduce a Financial Services and Markets Bill, which will, among other things:- Introduce new statutory objectives for the financial services regulators to support growth and international competitiveness.
- Implement the changes to the wholesale markets arising out of the Wholesale Markets Review. HM Treasury confirmed in March of this year that the changes that will be made by legislation and where powers will be delegated to the financial services regulators for rules to be made. Among the changes are the removal of the share trading obligation and the double volume cap, changes to the derivatives trading obligation, taking OTC derivatives that are economically equivalent to exchange traded commodity derivatives out of the position limits regime, and the establishment of a consolidated tape.
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UK Payment Systems Regulator Panel Publishes Report on Digital Payments Initiative
05/10/2022
The U.K. Payment Systems Regulator Panel has published a report on its Digital Payments Initiative, which investigated potential barriers to the take-up of digital payments and possible solutions. The Panel advises the PSR on a continuous basis but undertook the Digital Payments Initiative as a special project to address the issue of consumers failing fully to embrace the benefits of digital payments.
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European Commission Consults on Revised EU Payment Services Directive and Open Finance
05/10/2022
The European Commission has published three consultations on the revised EU Payment Services Directive and on open finance. The results of the consultations will help inform the Commission's review of PSD2 and proposed legislation on a broader open finance framework, as part of plans developed under the 2020 EU Digital Finance Strategy and EU Retail Payments Strategy. The review of PSD2 will take stock of the impact that the Directive has had on the EU payments market and whether its objectives have been achieved. The open finance review will gather evidence on the current state of open finance, its further development and effective consumer protection. The EU is proposing to develop an open finance framework, as outlined under the EU's 2021 communication on the Capital Markets Union.
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Queen’s Speech Confirms Government Will Proceed with Brexit Freedoms Bill
05/10/2022
Prince Charles, Prince of Wales, delivered the Queen’s speech in which he announced that the government will be introducing the so-called Brexit Freedoms Bill, which was first announced by Prime Minister Boris Johnson on January 31, 2022, and is intended to make it easier to amend or remove retained EU laws to better suit the U.K.’s circumstances and policies. The Brexit Freedoms Bill will work in tandem with a government drive to reform, repeal and replace EU laws that are seen as outdated, cumbersome or otherwise not in the U.K.’s national interest.
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HM Treasury Publishes Policy Statement on Protecting UK Wholesale Cash Infrastructure
04/26/2022
HM Treasury has published a Policy Statement on its plans for protecting the U.K.'s wholesale cash infrastructure. In recent years, use of cash has diminished in favour of cashless transactions but the U.K. government is aware of the need to continue supporting cash transactions, particularly for elderly and vulnerable groups. The government has been investigating the use and protection of cash payments in the retail sector, including a consultation on protecting access to cash launched in 2021. The results of that consultation are under consideration.
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European Commission Consults on Potential Digital Euro
04/05/2022
The European Commission has launched a targeted consultation on a possible digital euro. The EU is considering introducing a digital euro for retail payments, which would be available alongside cash. A decision has not yet been made. The European Central Bank, responsible for the design and implementation of the digital euro, launched a project in July 2021 to get ready for the potential issuance of a digital euro. The introduction of a digital euro would require an EU regulation based on a proposal by the European Commission and agreed through the co-legislative process. Legislative changes would also be needed for existing legislation (e.g., under the revised Payment Services Directive). Central banks from non-euro area Member States also envisage issuing digital currencies.
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UK To Bring Stablecoins Used for Payments Under Regulation
04/04/2022
Following the call for evidence issued in January 2021, the U.K. government has confirmed that it will bring the issuing or facilitating the use of stablecoins used as a means of payment into the U.K. regulatory perimeter, in an announcement by John Glen, MP, at U.K. Fintech Week. The details were published in a response to the consultation.
Consistent with the proposals under the Future Regulatory Framework Review, the government will set the regulatory perimeter, objectives and principles and the regulators - the Financial Conduct Authority, the Bank of England and the Payment Systems Regulator - will set out the detailed requirements in rulebooks. The government also confirms that it intends to consult later in 2022 on regulating a wider set of crypto activities, including trading of cryptocurrencies such as Bitcoin and Ether.
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UK Payment Systems Regulator Highlights Potential Cyber Security Risks Arising from the Situation in Ukraine
03/01/2022
The U.K. Payment Systems Regulator has issued a statement on the situation in Ukraine. The PSR encourages firms to reflect on how they are managing their risks related to the situation, in particular:- the ability of the firm to bear an attack from a sophisticated state actor;
- whether staff are available to handle an elevated cyber risk from state sponsored and other actors; and
- implications of sanctions for third-party suppliers, and the resilience of those suppliers.
The PSR highlights the guidance issued by the National Cyber Security Centre on actions to take in response to the Ukraine situation, and it warns firms to remain vigilant of any cyber security threat. -
Financial Stability Board Publishes 2022 Work Priorities
02/17/2022
The Financial Stability Board has published a letter to G20 Finance Ministers and Central Bank Governors outlining its work priorities for 2022, which are:
- Supporting financial market adjustment to a post-COVID-19 world: the FSB observes vulnerabilities in the financial system, such as embedded leverage in some parts of the system and rising real estate and other asset valuations, which could pose risks to stability in the event of tightening financial conditions. Uneven unwinding of pandemic support measures is also a risk and the FSB will prepare an interim report in July and final report in October on policy considerations to support a more even global pandemic recovery.
Read more.ATTORNEYS: Thomas Donegan, Chloe Barrowman
TOPICS : Environmental, Social and Governance, Financial Services, FinTech, Payment Services -
UK Payment Services Regulator Announces Closure of Phase 1 Technical Environment for Confirmation of Payee Services
02/10/2022
The U.K. Payment Systems Regulator has announced a phase-out of the Phase 1 technical environment that enables certain U.K. payment services providers to provide confirmation of payee services. The PSR's Specific Direction 11, which comes into effect on February 11, 2022, requires existing Phase 1 CoP participants to operate within the Phase 2 technical environment from May 1, 2022. The Phase 1 technical environment will then permanently close on May 31, 2022. Phase 1 participants are expected to provide information, including their intended switchover date and a description of their progress towards achieving switchover, to Pay.UK, the body responsible for maintaining Phase 1 standards, on a monthly basis.
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Permanent Lower Threshold for Notification of Net Short Positions Under EU Short Selling Regulation Announced
01/11/2022
A Commission Delegated Regulation, published in the Official Journal of the European Union, amends the EU Short Selling Regulation to make permanent the lower notification threshold for notifying national regulators of net short positions held in the shares of companies traded on EU regulated markets. The threshold for notification will be 0.1% of the issued share capital of the company in question and each 0.1% above that. The lower threshold will apply from January 31, 2022.
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European Banking Authority Seeks to Address Divergence on Use of Strong Customer Authentication Exemption
10/28/2021
The European Banking Authority is consulting on draft Regulatory Technical Standards to amend the existing RTS on strong customer authentication and common and secure open standards of communication under the EU Payment Services Directive (known as PSD2). Responses to the consultation may be submitted until November 25, 2021.
PSD2 requires payment service providers to apply SCA each time a customer accesses their payment account online. The existing RTS govern the process by which payment service providers authenticate the identity of customers and provide exemptions to the SCA requirements. One of the exemptions is available, on a voluntary basis, when a customer accesses limited payment account information, provided that SCA is applied for the first access and at least every 90 days subsequently. The EBA is proposing to make the exemption mandatory for PSPs where the account information is accessed through an account information service provider, subject to certain conditions being met to ensure the safety of the user's data. The exemption would remain voluntary when a user directly accesses the account information. -
UK Government Sets out Key Actions to Secure Its Vision for Payments
10/11/2021
HM Treasury has published a response to the Payments Landscape Review call for evidence. The government sets out the key areas and steps for government, regulators, and industry to achieve a payments sector at the vanguard of technology and innovation.
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UK Government Proposes Measures to Protect Direct Access to Cash
07/01/2021
HM Treasury has opened a consultation on policy proposals for geographic access requirements upon designated firms to protect access to cash across the U.K. The consultation follows the Access to Cash: Call for Evidence, published in October 2020, which sought views on the considerations on how to maintain a sustainable network of retail cash infrastructure in the U.K. and support the use of cash by people and businesses over time. Responses to the consultation may be submitted until September 23, 2021.
The main proposal is the introduction of geographic requirements based on cash access (e.g. ATM) facilities being available within maximum distances of a minimum percentage of the population. Geographic parameters are already used in cash provision - LINK's ATM scheme, for example, has committed to protecting free-to-use ATMs more than 1km away from the next nearest free-to-use source of cash and protecting free access to cash on high streets that do not have a free-to-use source of cash within 1 km. The Post Office Network is obliged to ensure that 99% of the total population must be within 3 miles of their nearest Post Office and 95% must be within 1 mile. HMT's proposals for designated firms would impose minimum requirements that ensure reasonable access to withdrawal and deposit facilities for individuals and reasonable access to deposit facilities for SMEs. The government does not intend to consider further factors, such as local needs, deprivation, vulnerability, and service levels, which will be for the industry to address. Flexibility would be built in to the legislative provisions to allow the government to adjust the requirements over time.
Read more.TOPIC : Payment Services -
UK Taskforce on Innovation, Growth and Regulatory Reform Publishes Recommendations
06/16/2021
The Taskforce on Innovation, Growth and Regulatory Reform has published its report, making several recommendations for reforming the U.K.'s approach to regulation as well as practical suggestions for implementing the reforms. The main recommendation tasks the government with building a U.K. regulatory framework that has proportionality at its core and that is based on the principles of the common law. The report also provides specific proposals for regulatory reforms across several sectors, identified as high growth sectors, including the financial services sector. The TIGRR recommendations will be progressed by the newly established Brexit Opportunities Unit, which is being led by Lord Frost, Minister of State at the Cabinet Office. Consultations on proposals to implement these ambitious recommendations are expected later this year.
The TIGRR report recommends the approach to regulation is reformed along traditional common law lines, moving away from the EU codified system. The report suggests that the government reconsiders the approach to regulation with the aim of enhancing productivity, encouraging competition and invigorating innovation.
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UK Discussion Paper on Systemic Stablecoins Published
06/07/2021
The Bank of England has published a discussion paper on new forms of digital money that are potentially systemically important, focusing on systemic stablecoins. HM Treasury recently consulted on bringing certain crypto-assets into the U.K. regulatory perimeter and proposed that the BoE would regulate systemic stablecoins (under the Banking Act 2009) and that the Financial Conduct Authority would be responsible for consumer protection and conduct regulation. Feedback to the discussion paper can be submitted until September 7, 2021. The feedback will inform the BoE's next steps and it will consult on a specific regulatory framework for stablecoins, pending the finalization of the anticipated legislation.
According to the BoE, systemic stablecoins would be those that have the potential to scale up and grow rapidly and become widely used for payments by individuals and non-financial businesses. Non-systemic stablecoins would be those that are not widely used for payments and would not be subject to regulation by the BoE. Systemic stablecoins would be: (i) denominated in sterling; (ii) backed by assets that make them stable in value, unlike crypto-assets that have no safeguard, such as Bitcoin; and (iii) would not be created by lending to the real economy, unlike commercial bank money.
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Financial Stability Board Consults on Global Targets for Addressing the Four Challenges of Cross-Border Payments
05/31/2021
The Financial Stability Board has launched a consultation on proposed global targets for addressing the four challenges to cross-border payments. The G20 is prioritizing the enhancement of cross-border payments and the FSB states that public authorities have an important role to play in leveraging opportunities and addressing challenges in both existing and new arrangements supporting cross-border payments. In November 2020, the G20 endorsed the FSB's Roadmap and the related 19 Building Blocks. The Roadmap presents a high-level plan for tackling the issues and sets both short-term and longer-term goals and milestones. The Building Blocks indicate where further public and private sector work would enhance cross-border payments and address the frictions ascertained by the FSB. The consultation closes on July 16, 2021. The FSB will publish its final recommendations to the G20 in October 2021.
Read more.TOPIC : Payment Services -
European Securities and Markets Authority Issues Call for Evidence on Digital Finance
05/25/2021
Following the publication by the Commission of its Digital Finance Strategy in September 2020, the Commission has asked the European Supervisory Authorities for technical advice on the regulatory and supervisory challenges of three areas, namely the growing fragmentation of value chains in finance, digital platforms and bundling of various financial services, and groups combining financial and non-financial activities.
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UK Conduct Regulator Warns E-Money Firms on Misleading Customers
05/18/2021
The U.K. Financial Conduct Authority has written to the CEOs of electronic money firms asking them to ensure that their customers are aware of how their money is protected. According to the FCA, many e-money firms (some of which are start-ups and FinTechs) compare their services to traditional bank accounts and portray in their financial promotions their services as an alternative to a bank account, but do not adequately disclose the differences in protections between e-money accounts and bank accounts. In particular, e-money firms do not make it clear enough that Financial Services Compensation Scheme protection does not apply to e-money accounts. The warning follows the FCA's publication in summer last year of a letter to CEOs and guidelines on safeguarding which set out the FCA's expectations of e-money firms in light of the increased use of e-money accounts during the pandemic.
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European Central Bank Publishes Amendments to Systemically Important Payment Systems Regulation
05/05/2021
An amending Regulation (Regulation (EU) 2021/728) and two amending Decisions (Decision 2021/729 and Decision 2021/730) have been published in the Official Journal of the European Union, introducing certain changes to the SIPS Regulation on oversight requirements for systemically important payment institutions. The SIPS Regulation applies to systemically important large-value and retail payment systems and is designed to improve their safety and efficiency. Draft versions of the amending Regulation and Decisions were consulted on between November 2020 - January 2021 and proposed: (i) changes to the criteria for determining which of the Eurosystem central banks should be the competent authority for oversight of a SIPS; (ii) introduction of an additional methodology for identifying a payment system as a SIPS; and (iii) introduction of a phasing-out period for the reclassification of a SIPS as a non-SIPS.
Read more.TOPIC : Payment Services -
UK Law Commission Consults on Digital Assets and Electronic Trade Documents
04/30/2021
The U.K. Law Commission has launched two consultations, one on digital assets and the other on electronic trade documents. Responses to the consultations can be submitted until July 30, 2021.
Digital Assets
The Law Commission has issued a Call for Evidence on digital assets following a request from the government for recommendations for reforms to U.K. laws that will ensure that the laws can accommodate both cryptoassets and other digital assets. The Call for Evidence will be followed by a consultation at the end of 2021 with proposals for law reforms.
The existing laws of England and Wales do not provide legal certainty as to the legal status of digital assets. Providing certainty would encourage the use of the laws of England and Wales and jurisdiction in digital asset transactions. The Call for Evidence requests feedback about, and evidence of, the ways in which digital assets are being used, treated and dealt with by market participants. It also seeks views on the potential consequences of digital assets being "possessable."
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HM Treasury Publishes Response to Consultation on Insolvency Changes for Payment and Electronic Money Institutions
04/26/2021
HM Treasury has published its response to feedback on its December 2020 consultation on a proposed Special Administration Regime for payment institutions and electronic money institutions that fall within the scope of the Payment Services Regulations 2017 and the Electronic Money Regulations 2011. The SAR is designed to address shortcomings of the existing insolvency regime and would apply alongside Part 24 of the Financial Services and Markets Act 2000, which would also be extended to apply in full to PIs and EMIs. Key objectives of the regime will include returning customer funds as soon as reasonably practicable, facilitating timely cooperation with payment systems and authorities and rescuing the institution as a going concern or winding it up in the best interests of creditors.
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Kalifa Review of UK Fintech Published
02/26/2021
HM Treasury has published the highly-anticipated Independent Strategic Review of U.K. Fintech, led by Ron Kalifa OBE. The aim of the recommendations is to, among others, ensure the U.K.'s competitiveness, attract investments for individual fintechs and raise the U.K.'s status as a global hub. The Kalifa Review makes recommendations in five key areas: (i) policy and regulation; (ii) skills and talent; (iii) investment; (iv) international attractiveness and competitiveness; and (v) national connectivity. The delivery of these recommendations is to be led by the Centre for Finance, Innovation and Technology, which is mandated by the Government but led by the private sector. This post focuses on the policy and regulation discussion.
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European Banking Authority Publishes Opinion on Removal of Obstacles to Account Access Under Revised Payment Services Directive
02/22/2021
The European Banking Authority has published an Opinion requiring EU national regulators to assess the steps taken by account servicing payment services providers to remove obstacles to the provision of account information services and payment initiation services by third-party providers.
Read more.TOPIC : Payment Services -
EU Launches Review of the Financial Collateral Directive
02/12/2021
The European Commission has launched a targeted consultation related to post-trade services, which considers the EU Financial Collateral Directive. The Commission is also consulting on the Settlement Finality Directive, combining the review of these two Directives since they are closely related. The consultations close on May 7, 2021. The FCD establishes a harmonized EU framework for the use of financial collateral to secure transactions. It provides for close-out netting provisions to be enforceable under their terms and ring-fences the operation of financial collateral arrangements should one of the parties become insolvent, creating protections from the usual insolvency laws of a Member State. The FCD consultation does not cover the re-use of financial collateral given under a security financial collateral arrangement by a collateral taker as this issue has recently been addressed in the Securities Financing Transactions Regulation. The consultation focuses on issues relating to the recognition of close-out netting provisions and its impact on SFD systems.
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EU Launches Review of the Settlement Finality Directive
02/12/2021
The European Commission has launched a targeted consultation related to post-trade services, which considers the EU Settlement Finality Directive. The Commission is also consulting on the Financial Collateral Directive, combining the review of these two Directives since they are closely related. The consultations close on May 7, 2021. The SFD establishes various insolvency carve-outs for designated market infrastructure systems and provides for finality of transactions within such systems. Under the protections currently afforded by the SFD, transfer orders which enter into designated systems within certain deadlines are guaranteed to be finally settled and cannot be unwound at the behest of insolvency officials, regardless of whether the sending participant has become insolvent or transfer orders have been revoked in the meantime. The SFD essentially excludes "insolvency claw-back" rules, such as those for transactions at an undervalue or trading by insolvent or near-insolvent entities, from applying to holdings in designated systems and modifies the timing of "moratorium" rules which prevent transactions by insolvents. This also gives certainty as regards holdings in central securities depositories and as to the finality of transactions in some clearing and payment systems. Under the SFD, each EU Member State automatically recognizes systems that have been designated by other Member States. However, there is no EU regime for third country systems, a lacuna which has already been fixed by the U.K. in its SFD laws after Brexit.
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UK Payment Services Regulator Consults on Delivery and Regulation of the UK's New Payments Architecture
02/05/2021
The U.K. Payment Systems Regulator has opened a consultation on the delivery and regulation of the U.K.'s New Payments Architecture. The NPA will reorganize the clearing and settlement of most of the U.K.'s domestic interbank payments, including payments that currently use the BACS and Faster Payments systems. The PSR consulted last year on issues relating to competition and innovation in payment services and remains concerned about these issues. The PSR is also concerned that the current NPA programme will not provide value for money and will delay the achievement of the benefits of the NPA. The PSR is therefore seeking views on its proposals to reduce these risks to the successful delivery of the NPA. The proposals include narrowing the scope of the initial contract for delivery to those services that support the replacement and upgrade of Faster Payments and on ways to mitigate the risks to competition and innovation, including procurement, contractual provisions and governance provisions. Responses to the proposals on reducing the risk to delivery of the NPA may be submitted until March 19, 2021 and responses to the proposals on mitigating competition issues may be submitted until May 5, 2021.
View the PSR's consultation paper on delivery of the NPA.
View details of the PSR's consultation on competition and innovation. -
UK Regulator Proposes Amendments to UK Technical Standards on Secure Customer Authentication
01/28/2021
The U.K. Financial Conduct Authority has launched a consultation on proposed changes to the U.K. Regulatory Technical Standards on secure customer authentication and common and secure methods of communication and on proposed payments-related amendments to the Perimeter Guidance Manual and the FCA Payment Services and Electronic Money Approach Document. The proposals are relevant for payment service providers, e-money issuers, payment institutions, e-money institutions and registered account information service providers (AISPs). Responses to the consultation may be submitted until February 24, 2021, for issues relevant to contactless payments, and until April 30, 2021 for the remaining proposals.
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UK Government Proposes Extending Regulatory Perimeter to Capture Stablecoins
01/07/2021
HM Treasury has opened a consultation on the proposed U.K. approach to crypto-assets and stablecoins, in particular a proposal to bring stablecoins into the U.K. regulatory perimeter. Responses to the consultation may be submitted until March 21, 2021. The government will consider the responses to the consultation and publish a response with further details on how the approach would be implemented in law. If the policy approach is followed, the regulators would consult further on rules for firms.
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HM Treasury Consults on Draft Rules for Insolvency Regime for Payment and Electronic Money Institutions
12/17/2020
HM Treasury has published a supplementary annex to its consultation on the U.K. Government's proposed Special Administration Regime for payment institutions and electronic money institutions. The SAR would address shortcomings of the existing insolvency regime for PIs and EMIs and would apply alongside Part 24 of the Financial Services and Markets Act 2000, which would also be extended to apply in full to PIs and EMIs.
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HM Treasury Consults on Insolvency Changes for Payment and Electronic Money Institutions
12/03/2020
HM Treasury has launched a consultation on the U.K. Government's proposed Special Administration Regime for payment institutions and electronic money institutions that fall within the scope of the Payment Services Regulations 2017 and the Electronic Money Regulations 2011. The SAR would address shortcomings of the existing insolvency regime for PIs and EMIs and would apply alongside Part 24 of the Financial Services and Markets Act 2000, which would also be extended to apply in full to PIs and EMIs. Responses to the consultation should be submitted by January 14, 2021.
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European Central Bank Consults on Changes to Systemically Important Payment Systems Regulation
11/27/2020
The European Central Bank is consulting on revisions to the Regulation on oversight requirements for systemically important payment systems (known as the SIPS Regulation). The SIPS Regulation applies to systemically important large-value and retail payment systems. The Regulation is designed to improve the safety and efficiency of those payment systems.
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EU Consultation on Proposed Revisions to the Guidelines on Major Incident Reporting for Payment Service Providers
10/14/2020
The European Banking Authority has opened a consultation on proposed revisions to the Guidelines on major incident reporting under the revised Payment Services Directive. PSD2 requires payment services providers to establish and maintain effective incident management procedures for, among other things, detecting and classifying major operational or security incidents. PSPs are required to notify their home state regulator if a major incident occurs. The Guidelines, which have applied across the EU since January 1, 2018, stipulate the criteria that PSPs should use to classify an operational or security incident as "major." Major incidents must be reported to a PSP's national regulator using the format provided in the Guidelines. The EBA is consulting on targeted amendments to the Guidelines. Responses to the consultation may be submitted until December 14, 2020. The EBA expects that the revisions to the Guidelines will become applicable by Q4 2021.
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Final Roadmap for Enhancing Cross-Border Payments Published by the Financial Stability Board
10/13/2020
The Financial Stability Board has published a Roadmap for enhancing cross-border payments. The Roadmap is the final stage in the G20's three-stage process to enable countries to enhance their cross-border payments systems. The FSB published the Stage 1 report in April 2020, which identified existing challenges in cross-border payments systems and specified key "frictions" in the cross-border payments system that contribute to these challenges. The Stage 2 report, published by the Committee on Payments and Market Infrastructures in July 2020, covered the 19 building blocks where further public and private sector work would enhance cross-border payments and address the frictions ascertained by the FSB.
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Financial Stability Board Publishes Final Recommendations on Global Stablecoins
10/13/2020
Following its consultation earlier this year, the Financial Stability Board has published a final report on the regulation, supervision and oversight of global stablecoin arrangements. In the report, the FSB discusses the characteristics of GSCs, the risks posed by GSCs, existing approaches to regulating and supervising GSCs and issues with cross-border supervision of GSCs. Alongside the report, the FSB has published a summary of the responses to its consultation.
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