JANUARY 2021
AMEIS REGFACTS FINTECH - Related Regulatory & Compliance News
In This Issue : January 2021 Regulatory Round-Up Ontario focuses on creating a favourable innovation and FinTech ecosystem HM Treasury consults on the regulation of cryptoassets and stablecoins Anticipating the UK Fintech Strategic Review report FinCEN proposed reporting requirements for CVC and LTDA transactions OCC clarifies position about regulatory characterization of bankissued stablecoins CipherTrace Published 2020 Report on Cyber crime and AML French First Fintech Week
Ontario focuses on creating a favourable innovation and FinTech ecosystem On January 22, 2021, the Ontario Capital Markets Modernization Taskforce submitted its Final Report to the Minister of Finance. The Report includes a total of 74 recommendations including the creation of an Ontario Regulatory Sandbox to benefit entrepreneurs and in the longer-term, consider developing a Canadian Super Sandbox. The Ontario Regulatory Sandbox will enable innovative businesses to test new financial services and products and business models in real markets conditions and under prudential supervision. The sandbox will be inclusive of entities participating in different aspects of the financial services sector (e.g., capital markets, insurance and mortgage brokering). Another key recommendation of the Taskforce is the facilitation of economic growth and innovation, including being an advocate for smaller innovative businesses, and expanding the Key takeaways range of the Innovation Office’s services (identifying capital markets regulation changes that would benefit smaller and innovative businesses and their investors, identifying and researching challenges faced by smaller businesses when raising capital‌). Other recommendations of importance to the broader capital markets include: Improving the capital market regulatory framework. Expanding the mandate of the OSC to include fostering capital formation and competition in the markets and changing the name of the Ontario Securities Commission to Ontario Capital Markets Authority. Moving to a single SRO that covers all advisory firms, including investment dealers, mutual fund dealers, portfolio managers, exempt market dealers, and scholarship plan dealers. Transitioning towards an access equals delivery model of dissemination of information in the capital markets, and the digitization of capital markets. Expediting the SEDAR+ project. Requiring enhanced disclosure of material ESG information, including forward-looking information for public issuers. Allowing reporting issuers to obtain beneficial ownership data.
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HM Treasury consults on the regulation of cryptoassets and stablecoins Published on January 7, 2021, this consultation forms part of a broader consultative process on the government's approach to cryptoasset regulation and ‘seeks views on how the UK can ensure its regulatory framework is equipped to harness the benefits new technologies, supporting innovation and competition, while mitigating risks to consumers and stability’. Key Takeaways Impacted firms will be subject to high-level requirements such as: Authorization requirements with associated threshold conditions Prudential requirements, including capital and liquidity requirements Requirements to safeguarding the token (with the focus on wallets and exchanges to ensure those entities are appropriately protecting users' tokens and the privacy and security of keys to those tokens) Systems, controls, risk management and governance requirements Financial crime requirements Security requirements (including cyber and cloud)
The document includes HM Treasury's policy approach outlining the government proposed objectives and principles for cryptoassets regulation. Objectives include protecting financial stability and market integrity (by maintaining the appropriate regulatory standards, ensuring infrastructure is operationally resilient…), delivering robust consumer protections and continuing to encourage and support UK fintech firms. Some of the principles include ensuring that the government will remain technology agnostic by applying the principle of ‘same risk, same regulatory outcome’ with the aim to limit the risk of arbitrage. The government will make sure that its approach is agile and reflects international discussions by working with other jurisdictions and international setting-bodies. To maintain the current division of UK regulatory responsibilities, the government and HM Treasury will be responsible for setting the objectives and principles while regulators will be responsible for setting detailed rules.
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The government is proposing a ‘staged and proportionate approach to regulation’ with a primary focus on bringing stablecoins into the regulatory perimeter as the latter could reliably be used for retail or wholesale transactions. Stakeholders are invited to provide their comments by 21st March, 2021.
Read our article on the regulation of crytptoasset promotions, first measure taken by the HM Treasury.
Anticipating the UK Fintech Strategic Review report The report and recommendations of the UK Fintech Strategic Review is expected to be published this quarter. The UKs financial technology sector has a vital role to play in the economy. The report and recommendations will provide a roadmap to ensure the sector’s growth. Five workstreams : 1. Developing skills and talent that reflect a robust and diverse UK workforce 2. Diversifying investment and attracting growth funding 3. Improving national connectivity to support the growth of regional fintechs 4. Enabling and fostering wider adoption of innovation through policy development 5. Promoting international attractiveness and competitiveness
Initially launched last year, the review has three broad objectives. First, to ensure UK fintech has the resources to grow and succeed. Second, to create conditions for continued widespread adoption of fintech solutions to benefit businesses and individuals. Third, to advance UK fintech’s global reputation for the innovation and transformation of financial services. Five different workstreams were identified to consider ways to foster innovation, maintain an ecosystem that supports growing firms, and promote the integration of new technologies across financial services.
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FinCEN extends proposed rules on reporting requirements for CVC and LTDA transactions The Financial Crimes Enforcement Network (FinCEN) is proposing reporting and record keeping requirements for banks and money services businesses concerning transactions on convertible virtual currency (CVC) and digital assets with legal tender status (LTDA). These types of assets are considered “monetary instruments” for purposes of the Banking Secrecy Act (BSA). The proposed rule seeks to address criminal access to and use of these assets. In response to the increasing use of virtual currencies and in particular CVCs to facilitate international criminal activity, U.S. authorities are proposing new reporting and record keeping requirements. In addition to the existing CVC/LTDA Transaction Reporting, these new rules intend to add more transparency and close antimoney laundering (AML) regulatory gaps for certain transactions. If adopted, banks and money services businesses (MSB) would need to report CVC and LTDA transactions with unhosted or highrisk jurisdiction wallets exceeding $10,000 and maintain records of customer CVC or LTDA transactions and their counterparties when the transaction amount exceeds $3,000.
Key takeaways The proposed Rule was first published on December 18, 2020 for a short 15 days comment period (see our article here). But following strong criticism and concern about the extent of the impact of the Proposed Rule from a large number of market participants, FinCEN allowed for an extension. Comments on the proposed reporting requirements were to be provided by January 30, 2021 and comments on the requirement to report counterparty information and the proposed recordkeeping requirement by March 1, 2021.
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Market Insights OCC clarifies position about regulatory characterization of bank-issued stablecoins Chief Counsel of the Office of the Comptroller of the Currency ("OCC") issued an interpretive letter addressing the legal permissibility of national banks to use independent node verification networks ("INVN"), a distributed ledger being a common form of an INVN, and stablecoins for payment activities.
Ciphertrace published its 2020 year end cryptocurrency crime and anti-money laundering report highlighting news and trends over the past year Among the key findings -- cyrypto thefts and fraud top $1.9bn, down 57% in 2020. Fraud is the dominant cryptocurrency crime, followed by theft and ransomware. Decentralized finance (DeFi) showed to be a growing threat vector for fraud and money laundering, making up over half of the crypto thefts.
Le Swave, France FinTech, the ACPR and the AMF have joined forces to organise the first FRENCH FINTECH WEEK that will be held from 11 October to 15 October 2021. During the event, participants will have the opportunity to, among others, learn about the supervisory mechanisms in place during the ACPR and AMF Fintech Forum, supported by the Banque de France.
Stay up-to-date with REGFACTS, INDUSTRY NEWS & TRENDS by Ameis Regulatory Services.
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Ameis Regulatory Services focuses on providing regulatory and compliance support for fintech companies
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Complex landscape & widening gaps
We help you understand the rules that govern your activites, services and products, enabling you to meet your ongoing regulatory obligations and navigate the ever-evolving, complex regulatory landscape.
Increasing regulatory requirements and the pace of change are making it harder for you to keep up with the pressures of compliance and managing cost-effective operations
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