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 MATERIAL

Spotlight: EU crypto regulation: MICAR overview for issuers and crypto-asset service providers

The EU's Markets in Crypto-assets Regulation (MiCAR) introduces an EU regulatory framework for the issuance of, intermediating and dealing in crypto-assets. Parts of MiCAR impacting the issuance, offering and admission to trading of stablecoins entered into force at the end of June 2024, while equivalent provisions for other crypto-assets, new licensing and conduct of business requirements for cryptoasset service providers, and a market abuse regime with respect to cryptoassets will apply from the end of the year.

We look at what issuers of stablecoins and other crypto-assets, custodians and other crypto-asset service providers need to know now.

GLOBAL LEGAL AND REGULATORY UPDATES, INDUSTRY GUIDANCE AND PUBLICATIONS

Americas

Canada:

• (26 Sep 2024) The Canadian Securities Administrators (CSA) has announced a further extension of the deadline by which it expects cryptoasset trading platforms (CTPs) to comply with its Staff Notice 21-333 on trading value-referenced cryptoassets. The CSA has extended the deadline to 31 December 2024 in order to provide more time for CTPs to either comply with the terms and conditions of their registration and exemptive relief decisions, or their pre-registration undertakings, or to propose alternatives that address investor protection concerns, as long as any alternatives are in place or substantially finalised prior to 31 December 2024.  | Press release

APAC

Hong Kong:

• (27 Sep 2024) Hong Kong Monetary Authority (HKMA) circular on the risk associated with third-party IT solutions and reminding authorised institutions to ensure that adequate measures are put in place to effectively manage third-party dependencies and enhance operational resilience against the failure of third-party IT solutions. | Annex – Good practices for managing third-party IT solutions
• (27 Sep 2024) HKMA research paper on generative artificial intelligence (Gen AI) in the financial services sector
• (26 Sep 2024) The Securities and Futures Commission (SFC) and the HKMA have jointly published the conclusions to their March 2024 further consultation on enhancements to the over-the-counter (OTC) derivatives reporting regime for Hong Kong, to mandate the use of a unique transaction identifier (UTI) and a unique product identifier (UPI), and the reporting of critical data elements (CDE). The reporting regime will cover digital asset and crypto derivatives and the regulators have indicated that they will accommodate the use of the Digital Token Identifier (DTI) for these. They also intend to monitor developments in other jurisdictions concerning the relevant UPIs and asset class for digital assets and crypto derivatives and to align Hong Kong’s reporting requirements with international practices. | Press release

Taiwan:

• (30 Sep 2024) The Financial Supervisory Commission (FSC) has recommended that professional investors be allowed to invest in foreign virtual asset exchange-traded funds (ETFs) | Press release (in Chinese)

Europe

EU:

• (1 Oct 2024) Joint statement from the Association for Financial Markets in Europe (AFME), European Association of CCP Clearing Houses (EACH), European Central Securities Depositories Association (ECSDA), Federation of European Securities Exchanges (FESE) and FIA on the Digital Operational Resilience Act (DORA) and the definition of ICT services. Noting that the European Supervisory Authorities (ESAs) and the EU Commission are in the process of reviewing their responses to FAQs relating to DORA, the industry associations urge them to reinstate the guidance confirming that regulated financial services should not be treated as ICT services for the purpose of DORA and clarify that regulated financial services include any services and activities subject to the supervision of a financial services regulator including any ancillary or delegated services (as opposed to stand-alone ICT services). The statement calls on the ESAs and the Commission to issue the clarification to this effect within the Q&A portal for DORA as soon as possible.
• (1 Oct 2024) The EU Commission has adopted a Delegated Regulation under the Markets in Cryptoassets Regulation (MiCA) setting out regulatory technical standards (RTS) specifying the requirements, templates and procedures for the handling of complaints by cryptoasset service providers. | Annex
• (1 Oct 2024) The ESAs have appointed Marc Andries to lead their new joint Directorate in charge of oversight activities for critical third-party providers established by DORA. Marc Andries took up his new role as Director for DORA joint oversight on 1 October 2024. | Press release
• (30 Sep 2024) The EU Commission has adopted a Delegated Regulation under MiCA setting out RTS specifying the requirements, templates and procedures for the handling of complaints relating to asset-referenced tokens. | Annex
• (27 Sep 2024) Speech by Piero Cipollone, Member of the Executive Board of the European Central Bank (ECB), in which he argued that one of the key motivations behind the digital euro project is to bring central bank money into the digital age, which would provide a digital equivalent to banknotes and strengthen the EU's monetary sovereignty.
• (26 Sep 2024) ECB paper on how adopting the European framework for threat intelligence-based ethical red teaming (the TIBER-EU framework) will help competent authorities and financial entities fulfil the requirements for threat-led penetration testing under DORA.
• (26 Sep 2024) The EU Commission has adopted a Delegated Regulation under MiCA setting out RTS establishing a template document for cooperation arrangements between competent authorities and supervisory authorities of third countries. Article 107 of MiCA requires the competent authorities of EU Member States, where necessary, to conclude cooperation arrangements with supervisory authorities of third countries concerning the exchange of information and the enforcement of obligations arising under MiCA in third countries. The RTS provide a template document setting out the structure of these cooperation arrangements. | Annex

Netherlands:

• (26 Sep 2024) Dutch Authority for the Financial Markets (AFM) press release warning consumers about crypto pump-and-dump schemes. The AFM notes that such schemes will be banned under MiCAR from 30 December 2024.

UK:

• (30 Sep 2024) The Bank of England and the Financial Conduct Authority (FCA) have opened the Digital Securities Sandbox (DSS) to applications and published a joint policy statement setting out their approach to safely adopting new technologies in the operation of financial market infrastructures. The DSS is intended to facilitate the use of developing technology, such as distributed ledger technology (DLT), in the issuance, trading and settlement of securities by allowing firms to operate under a temporarily modified legal and regulatory framework. | BoE DSS webpage | BoE DSS dashboard webpage | BoE Digital Securities Sandbox Rules Instrument 2024 | Guidance on the operation of the Digital Securities Sandbox | FCA DSS webpage | FCA press release
• (27 Sep 2024) The Broadcast Committee of Advertising Practice (BCAP) has published a new rule banning ads for certain types of cryptoasset products from being broadcast to mainstream audiences. This rule is to maintain the existing restriction on such products and add more precision to the Code to acknowledge the broad and widespread category of investments that did not exist at the time of the rule's creation – including fungible and transferable cryptoassets, a category which includes cryptocurrencies and utility (fan) tokens. The new rule will take immediate effect. | Press release
• (26 Sep 2024) UK Finance blog post entitled 'Building a digitally resilient business: Staying ahead of ransomware, regulations and risks'
• (25 Sep 2024) The Bank of England (BoE) has announced the establishment of an Artificial Intelligence (AI) Consortium, which is intended to gather input from stakeholders on the capabilities, development, deployment, and use of AI in UK financial services. Applications for the AI Consortium are open. Further details can be found in the Consortium’s call for interest. The deadline for applying is 8 November 2024. | Terms of reference
• (25 Sep 2024) Speech by James Benford, BoE Executive Director for Data and Analytics Transformation and Chief Data Officer, on how the BoE is preparing for the potential that advances in artificial intelligence (AI) offer to improve how it works internally to deliver monetary and financial stability.
• (25 Sep 2024) The Payment Systems Regulator (PSR) has confirmed that the maximum reimbursement limit for victims of Authorised Push Payment (APP) scams will be £85,000 starting from 7 October 2024. | Press release

Middle East

Dubai:

• (1 Oct 2024) The Virtual Assets Regulatory Authority (VARA) has published its Regulations on the Marketing of Virtual Assets and Related Activities, which are effective from 1 October 2024.

EVENTS

• TradFi Meets Blockchain Policy Summit (New York, 10 October 2024) We are delighted to be hosting the 2024 TradFi Meets Blockchain Policy Summit on behalf of Capitol Asset Strategies at our office in New York. Join us for thoughtful panel conversations focused on traditional capital markets use of distributed ledger technology to sell and distribute regulated 'tokenized' financial products and the real business and regulatory challenges to wider adoption. You will hear from expert business leaders, legal professionals and policy leaders with panelists and attendees spanning traditional finance and crypto-native, all together in one room for insights on this growing market. | See the full agenda and speaker line up or register here.
• Global Financial Markets Perspectives Series: Financing digital infrastructure – data centre ABS and funding trends for data centres and digital infrastructure (online, 15 October 2024): With the rise of AI, demand for data continues to grow exponentially raising questions as to how the rapid roll-out and development of data centres will be financed over the next five to 10 years. Our European lawyers across infrastructure finance, project finance, real estate finance and asset backed finance will discuss the innovative financing structures we see for data centres including Europe’s first public data centre ABS and share views on financing trends in the digital infrastructure sector. | To register, please see the event series registration form
• Global Financial Markets Perspectives Series: AI Series: Data and cyber considerations for AI (online, 14 November 2024): Organisations developing, deploying or using AI systems and tools must navigate privacy, data protection and cybersecurity requirements alongside AI-specific regulations. These parallel, and at times overlapping, frameworks and rules raise new challenges but also enable fresh opportunities for organisations. Our global panel will share practical and market insights at the intersection of these developments, including in the context of governance and compliance programmes, risk management and contractual negotiations. | To register, please see the event series registration form