Clifford Chance

Welcome to this week's global fintech round-up, summarising fintech regulatory developments that have happened around the world along with our Clifford Chance fintech publications and upcoming events. 

Details of these and previous developments can also be found on our Fintech Topic Guide on the Clifford Chance Financial Markets Toolkit.

CLIFFORD CHANCE BRIEFINGS AND MATERIALS

• (1 Nov 2022) Talking Tech article – CMA response to the UK's AI policy paper
• (31 Oct 2022) Clifford Chance Tech Policy Horizon Scanner October 2022
• (31 Oct 2022) Talking Tech article – Hong Kong to allow retail access to virtual asset ETFs and considering legalizing retail virtual asset exchanges
• (28 Oct 2022) Talking Tech article – The EU Digital Services Act has been published in the Official Journal
• (28 Oct 2022) Clifford Chance briefing – English law in the 21st century: does it need an update to accommodate crypto?
• (27 Oct 2022) Talking Tech article– Next steps after U.S. President Biden issues executive order on U.S. data transfers from 'Qualified States'

Spotlight: Hong Kong to allow retail access to virtual asset ETFs and considering legalizing retail virtual asset exchanges

During its flagship Hong Kong Fintech Week conference this week, Hong Kong has announced several fundamental virtual asset-friendly changes to the city's regulatory stance. The Hong Kong Government issued a policy statement on 31 October 2022 which unveiled several key changes to its regulatory framework for virtual assets, in particular allowing retail access to virtual assets futures ETFs, and launching a consultation on how retail investors may be given a suitable degree of access to virtual assets. Read our article

GLOBAL LEGAL AND REGULATORY UPDATES, INDUSTRY GUIDANCE AND PUBLICATIONS

International

• (28 Oct 2022) International Monetary Fund working paper on digital money and central banks' balance sheets, which discusses several cases where substitution of currency in circulation and bank deposits may take place via digital money such as central bank digital currencies (CBDCs) or other e-money, and how this would impact the central bank balance sheet.
• (26 Oct 2022) The Bank for International Settlements (BIS) and four central banks have completed a successful pilot of the use of CBDCs by commercial banks for real-value transactions across borders, as part of Project mBridge. Project mBridge is a collaboration between the BIS Innovation Hub Hong Kong Centre, the Hong Kong Monetary Authority, the Bank of Thailand, the Digital Currency Institute of the People's Bank of China and the Central Bank of the United Arab Emirates. After experimenting with different technology architectures in earlier phases of the project, the project team developed a new blockchain, the mBridge Ledger, custom-built by central banks for central banks to serve as a specialised and flexible platform for implementation of multi-currency cross-border payments in CBDCs.| Report | Press release

Africa

Namibia:

• (26 Oct 2022) The Ministry of Information and Communication Technology has published a revised draft Data Protection Bill for public comments. Amongst other things, the draft Bill establishes a Data Protection Supervisory Authority, sets out the obligations of data controllers, and regulates the processing of information relating to individuals in order to protect their fundamental rights and freedoms, in particular their right to privacy concerning the processing of such information.

Americas

US:  

• (28 Oct 2022) The Cybersecurity and Infrastructure Security Agency, the Federal Bureau of Investigation and the Multi-State Information Sharing and Analysis Center have issued a joint guide to help organisations reduce the likelihood and impact of distributed denial-of-service attacks.
• (27 Oct 2022) The Consumer Financial Protection Bureau has outlined options to strengthen consumers' access to, and control over, their financial data as a first step before issuing a proposed data rights rule that would implement section 1033 of the Dodd-Frank Act. | Outline of proposals |  Press release
• (27 Oct 2022) The Department of Homeland Security has released the Cybersecurity Performance Goals, voluntary practices that outline the highest-priority baseline measures businesses and critical infrastructure owners can take to protect themselves against cyber threats. | Press release
• (27 Oct 2022) The Office of the Comptroller of the Currency has announced that it will establish an Office of Financial Technology in early 2023 to bolster its expertise and ability to adapt to a rapidly changing banking landscape. The Office of Financial Technology will build on and incorporate the Office of Innovation, which the OCC established in 2016 to coordinate agency efforts to support responsible financial innovation. | Press release
• (26 Oct 2022) Speech by Commodity Futures Trading Commission (CFTC) Commissioner Christy Goldsmith Romero, in which she discussed how crypto presents many similar financial stability risks as the traditional financial system, with parallel themes to 2008, and the potential for that risk to become systemic.

APAC

China:            

• (31 Oct 2022) Speech by the Governor of the People's Bank of China, Yi Gang, in which he indicated that privacy protection is one of the top issues among the many still remaining when it comes to the application of China's central bank digital currency.

Hong Kong:

• (31 Oct 2022) Financial Services and the Treasury Bureau policy statement on the development of virtual assets (VAs) in Hong Kong, which sets out the Government's policy stance and approach towards developing a vibrant sector and ecosystem for VAs in Hong Kong. Amongst other things, the policy statement indicates that the Securities and Futures Commission (SFC) will be conducting a public consultation on how retail investors may be given a suitable degree of access to VAs.| Press release
• (31 Oct 2022) SFC circular setting out the requirements under which the SFC would consider authorising exchange traded funds (ETFs) that obtain exposure to VAs primarily through futures contracts for public offering in Hong Kong.
• (31 Oct 2022) Speech by SFC Deputy Chief Executive Officer, Julia Leung, in which she outlined the steps the SFC is taking to review the 'professional investor only' requirement for cryptoasset customers. Amongst other things, Leung indicated that the SFC has been actively looking to set up a regime to authorise ETFs which provide exposure to mainstream VAs, with appropriate investor protection.

India:             

• (1 Nov 2022) The Reserve Bank of India has launched the first pilot in the Digital Rupee – Wholesale segment. The use case for this pilot is settlement of secondary market transactions in government securities. | Press release

Republic of Korea:    

• (28 Oct 2022) Speech by the Governor of the Bank of Korea, Chang Yong Rhee, about the lessons learned from the recent CBDC experiment at the Bank of Korea.
• (26 Oct 2022) The Personal Information Protection Commission (PIPC) and the French Commission Nationale de l'Informatique et des Libertés (CNIL) have signed a declaration of cooperation that will allow them to carry out joint research related to new technologies and data protection issues, to share their best practices and experiences including in the course of their investigations, to organise joint training workshops, and to exchange agents between each other. | Press release

Malaysia:     

• (31 Oct 2022) The Securities Commission Malaysia has announced new digital-related initiatives to spur the growth of the capital market and help support the country’s economic recovery, including scaling-up micro, small and medium enterprises' access to financing and encouraging innovation and building capabilities through digitalisation. | Press release

Singapore:   

• (2 Nov 2022) The Monetary Authority of Singapore (MAS) has announced that the first industry pilot under Project Guardian, which explores potential decentralised finance (DeFi) applications in wholesale funding markets, has completed its first live trades. Under the first pilot, a live cross-currency transaction involving tokenised Japanese Yen and Singapore Dollar deposits was successfully conducted. In addition, a simulated exercise was performed involving the buying and selling of tokenised government bonds. Two further industry pilots have now been launched to explore the issuance of tokens linked to trade finance assets and enable native digital issuance of wealth management products respectively. | Press release
• (31 Oct 2022) MAS report detailing potential uses of a purpose-bound digital Singapore dollar and the supporting infrastructure required, marking the successful completion of Phase 1 of Project Orchid. While the MAS has assessed that the case for a retail CBDC in Singapore is not compelling for now, it is continuing to explore good use cases for digital currencies, and Project Orchid is intended to build the technical capabilities and competencies necessary for the MAS to issue a retail CBDC, should the need arise.  | Press release

Europe

EU:  

• (31 Oct 2022) European Central Bank Research Bulletin, 'Cold hard (digital) cash: the economics of central bank digital currency', which considers the economic forces that are shaping the rise of digital money and looks at the implications for monetary policy and financial stability before discussing policy issues and challenges.
• (27 Oct 2022) The Digital Services Act (DSA), which creates harmonised EU rules for the regulation of intermediary services and illegal online content, has been published in the Official Journal.  The DSA will enter into force on 16 November 2022 and the majority of its provisions will apply from 17 February 2024. | Talking Tech article
• (27 Oct 2022) EU Commission supranational risk assessment for 2022, comprising a report on the assessment of the risk of money laundering and terrorist financing (ML/TF) affecting the EU's internal market, as well as an accompanying staff working document. The report warns that cryptoassets carry a significant ML/TF risk, due to the ease of transferring cryptoassets to different countries as well as the absence of homogeneous controls and prevention measures implemented at the global level. Amongst other things, the Commission is calling on national competent authorities to ensure that non-fungible token sales platforms are covered under the categories of obliged entities subject to their customer due diligence and other anti-money laundering/countering the financing of terrorism obligations.
• (26 Oct 2022) EU Commission legislative proposal to make instant payments in euro available to all citizens and businesses holding a bank account in the EU and in EEA countries. | Press release

France:          

• (26 Oct 2022) The Commission Nationale de l'Informatique et des Libertés (CNIL) and Korea's Personal Information Protection Commission (PIPC) have signed a declaration of cooperation that will allow them to carry out joint research related to new technologies and data protection issues, to share their best practices and experiences including in the course of their investigations, to organise joint training workshops, and to exchange agents between each other. | Press release

Netherlands:

• (18 Oct 2022) Dutch challenger bank Bunq has won its money laundering lawsuit against the Dutch Central Bank (DNB) about the extent to which new technologies can be used in this area. The court ruled that Bunq was within its rights to screen customers with artificial intelligence and data analytics. The court's ruling means that the online bank may continue to monitor in its own way. | Ruling (in Dutch) | Press release (in Dutch)

UK:

• (26 Oct 2022) The Information Commissioner's Office (ICO) has issued a warning to organisations to assess the risks of using emotion analysis technologies (which process data such as gaze tracking, sentiment analysis, facial movements, gait analysis, heartbeats, facial expressions and skin moisture) before implementing these systems. The ICO has indicated that organisations that do not act responsibly or fail to meet its expectations will be investigated. | Press release

EVENTS

Global Financial Markets Perspectives Series: Space Tech – a universe of ‘here and now’ investment opportunities (online, 8 November 2022): Space Tech is not just about futuristic colonies on Mars and asteroid-mining, it is also about the constellations of satellites that are already supporting so much of the tech here on earth, including ESG applications such as environmental monitoring. It is also critical infrastructure for the defence sector. Our panellists will discuss opportunities in the sector, New Space, financing considerations and the future direction of the industry. | To register, please see the event series registration form.

Global Financial Markets Perspectives Series: The future of banking – can CBDCs and custody of digital assets change the financial markets? (online, 15 November 2022): In this session we will consider some use cases for Central Bank Digital Currencies and how they may impact the financial markets particularly when combined with digital assets. This session will provide practical insights for in-house lawyers on novel legal issues that arise from CBDCs and how the role of custodian of digital assets may be evolving. | To register, please see the event series registration form

Global Financial Markets Perspectives Series: Managing AI in an evolving legal landscape (online, 29 November 2022): Our experts will examine recent legal developments in a number of jurisdictions, consider key issues affecting the successful deployment and management of AI and machine learning, look ahead to expected changes to relevant regulatory regimes and discuss what businesses can do to prepare.| To register, please see the event series registration form