admin – Page 29 – FinTech and Blockchain Law Watch

Next FinTech Steps in Bahrain

Oct 25 2017

The Central Bank of Bahrain (CBB) has announced the creation of a FinTech Unit. The aim of the Unit is to ensure the services are provided to individual and corporate customers in the FinTech sector. The announcement follows the CBB’s recent initiatives, which include a Regulatory Sandbox (which four companies have entered to date), in addition to the issuance of crowdfunding regulations for both conventional and Sharia compliant services.

The proposed Fintech Unit will be responsible for the approval process to participate in the Regulatory Sandbox, supervision of licensed companies’ activities and operations, including cloud computing, payment and settlement systems, and monitoring technical and regulatory developments in the FinTech field.

ASIC provides responses to industry feedback on its current and future approaches to RegTech

Oct 18 2017

By Michelle Chasser and Felix Charlesworth

On 15 September 2017, ASIC released its responses to industry feedback on its consultation Report 523 (REP 523). As mentioned in an earlier blog, REP 523 sets out the structure and framework for ASIC’s ‘Innovation Hub’ as well as its current and future approach to regulatory technology (RegTech).

Bank of England continues digital currency research

Oct 18 2017

By Rizwan Qayyum

A researcher at the Bank of England (“BoE”) recently explored the notion and technological requirements of a central bank issuing a digital currency (“CBDC”) and posited it may not be necessary to use distributed ledger technology (“DLT”) for the currency.

SEC’s Investor Advisory Committee Talks DLT, Blockchain

Oct 18 2017

By Eric A. Love

On October 12, the SEC’s Investor Advisory Committee (IAC) held a public meeting that included a panel discussion about blockchain and other Distributed Ledger Technology (DLT). The IAC advises the SEC on such regulatory issues as investor protection and securities market integrity.

The panel consisted of Nancy Liao of Yale Law School; Jeff Bandman, Principal at Bandman Advisors and previously Director of LabCFTC; Michael Bodson, President and CEO of DTCC; Fredrik Voss, Vice President of Blockchain Innovation at Nasdaq; and Adam Ludwin, Co-founder and CEO of Chain. Panelists largely focused on the potential benefits of blockchain and DLT for investors and the broader U.S. securities markets, as well as the accompanying risks that will likely require heightened regulatory oversight.

Bank of England FinTech Accelerator Lessons

Oct 16 2017

By Jonathan Lawrence

In remarks on 6 October: The Bank of England’s FinTech Accelerator: what have we done and what have we learned?, Andrew Hauser (Executive Director, Banking, Payments and Financial Resilience) surveyed the Bank’s current and future contributions to the FinTech regulatory debate.

Mr Hauser predicts that traditional distinctions between regulated and unregulated activities will blur as conventional models of intermediation being progressively ‘unbundled’. He posed questions about judging the appropriate positioning of the regulatory perimeter to ensure that risks are appropriately overseen whilst allowing valuable innovation to flourish. He highlighted a Proof of Concept within the Bank’s accelerator, Enforcd, which examines tools allowing the Bank’s legal team to draw out common trends in publicly available regulatory enforcement actions in order to inform the Bank’s own work.

Taiwan takes a stance on ICOs

Oct 16 2017

By Jim Bulling and Michelle Chasser

On 6 October 2017, Taiwan’s Financial Supervisory Commission chairman, Wellington Koo, attended a joint session of the Taiwanese parliament and cabinet in response to a request by legislator Jason Hsu to clarify Taiwan’s stance on cryptocurrency. During the session Koo pledged to adopt a friendlier stance to support the development of cryptocurrencies and blockchain and not follow neighbours China and South Korea who both recently banned initial coin offerings (ICOs).

This move appears to be well received by Hsu who stated “Just because China and South Korea are banning, doesn’t mean that Taiwan should follow suit – there is a huge opportunity for growth in the future. We should emulate Japan, where they treat cryptocurrency as a highly regulated, highly monitored industry like securities.”

Abu Dhabi Global Market sets out guidance on ICOs

Oct 16 2017

By Rizwan Qayyum

The Financial Services Regulatory Authority (FSRA) of the Abu Dhabi Global Market (ADGM) has released guidelines on ICOs and Virtual Currencies.

Much like other guidance, consumer protection is the key motivating factor behind this release. It notes that if an ICO has characteristics of a security, i.e. some associated right of ownership or value in the issuing company, then the FSRA will regulate. Christopher Kiew Smith, head of FinTech at the FSRA discusses the “incredibly diverse” market of quality of ICOs and thus some of the tokens issued will be of high-risk for consumers.

The FSRA appear to want to work with firms who aim to use ICOs in a “transparent fashion”. Under the issued guidelines, companies wishing to execute an ICO must approach the FSRA to learn whether it will fall under the body’s regulation. Companies will also be requested to publish a prospectus (which is assuming similar to a current white paper, but the extent of information required in this was not mentioned), and further, secondary market operators dealing with ICOs must also be approved by the FSRA.

There are, however, some ICOs that will remain unregulated. If a token issued as part of an ICO does not constitute an “offer of securities” it will remain unregulated. In such instances, the regulator said investors should exercise “extreme caution” before committing money.

The FSRA also commented on virtual currencies, noting that these are not legal tender, but seen as “commodities”; akin to precious metals. As such, these remain unregulated.

Meet us at Money20/20!

Oct 12 2017

K&L Gates is excited to be a part of Money20/20, the largest global event focused on payments and financial services innovation! Join us from October 22nd – 24th in Las Vegas, U.S.

We have several exciting events and programs taking place during the conference.

The UK’s Financial Conduct Authority’s David Geale on FinTech regulation

Oct 12 2017

By Jim Bulling and Michelle Chasser

On 27 September 2017, Fintech Melbourne in partnership with the UK’s Department for International Trade hosted an event on FinTech regulation with the UK Financial Conduct Authority’s (FCA) Director of Policy David Geale.

Interesting points from the night included:

The FCA has been, and continues to be, actively involved in engaging in dialogue with industry participants, both large firms and smaller start-ups.
As with other global regulators, the FCA is currently focused on blockchain, its potential effect on the market and the FCA’s role. The FCA released a discussion paper on distributed ledger technology earlier this year
The FCA recently issued an initial coin offering consumer alert.
The number of firms applying for the FCA’s regulatory sandbox exceeded initial expectations.
Some of the more interesting concepts that David has seen come through the sandbox put existing technology to a different use such as alternative credit scoring methods (eg using social media) and connected insurance (eg using fitbit data to determine insurance premiums).
Some UK firms have been experimenting with using videos to convey regulatory disclosures.
Digital identity and open banking are areas of interest going forward.

ICOs in Switzerland

Oct 12 2017

By Jonathan Lawrence

The Swiss Financial Market Supervisory Authority (FINMA) issued guidance on initial coin offerings (ICOs) on 29 September. FINMA has observed a marked increase in ICOs conducted in Switzerland. It has therefore published FINMA Guidance 04/2017 on this topic. FINMA has also indicated that it is investigating a number of ICO cases to determine whether Swiss regulatory provisions have been breached.

FINMA observes that the structuring of ICOs from technical, functional and business standpoints varies markedly from offering to offering. ICOs are currently not governed by specific regulations, either globally or in Switzerland. Swiss legislation on financial markets is principle-based; one such principle is technology neutrality. Collecting funds for one’s own account without a platform or issuing house is unregulated from a supervisory perspective in cases where repayment is not obliged, payment instruments have not been issued and no secondary market exists.

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