FinTech and Blockchain Law Watch – Page 36 – At the Crossroads of Law, Innovation and Commerce

Hong Kong and South Korea on ICOs

Sep 07 2017

By Rizwan Qayyum and Robert Crea

Hong Kong’s Securities and Futures Commission released a statement discussing whether existing regulations could be applicable to ICOs. This is a move likely precipitated by China’s ban on ICOs announced earlier this week.

The Executive Director of Intermediaries at the SFC, Julia Leung, warned that purchasers and those involved in an ICO need to be “that some ICO structures may be subject to Hong Kong securities laws.”

South Korean regulators have also taken a step towards tightening ICO regulation. South Korea’s digital currency task force group, comprised of the country’s central bank, and the Financial Services Commission (amongst other bodies) held a meeting on 3 September 2017, in which they discussed ICOs. It was noted that authorities will punish ICO fundraising platforms for violating the Capital Market Act by raising funds through stock issuance using digital currencies.

Bahrain announces first entrants into its FinTech regulatory sandbox

Sep 07 2017

By Jonathan Lawrence

The Central Bank of Bahrain (CBB) has announced the first two entrants into its FinTech regulatory sandbox: Tramonex, a London-based foreign exchange cash management solution for businesses; and NOW Money, a Dubai-based account and remittance service for low-income workers in the Gulf Cooperation Council countries. The CBB launched its Regulatory Sandbox Framework in June and updated the framework rules at the end of August. The sandbox application process is open to both existing CBB licensees (financial institutions with FinTech initiatives) and other companies (local and foreign). The latter may include financial sector companies as well as technology and telecom companies intending to test an innovative product or service, professional service firms which partner with or service financial institutions, or any other type of applicant working within the financial services.

Federal Government extends AML/CTF regulation to capture digital currency exchanges

Aug 31 2017

By Michelle Chasser and Felix Charlesworth

On Thursday 17 August 2017, the Minister for Justice tabled the Anti-Money Laundering and Counter-Terrorism Financing Amendment Bill 2017 (Bill).

The Bill will extend the Australian AML regime to cover digital currency exchange providers. Currently the AML regime applies only to ‘e-currencies’ which are backed by physical things such as bullion or precious metals while digital currencies backed by a cryptographic algorithm such as Bitcoin are excluded. The Bill repeals the definition of ‘e-currency’ and replaces it with the broader term ‘digital currency’ which is defined as a digital representation of value that:

functions as a medium of exchange;
is not issued by the authority of a government body;
is interchangeable with money; and
is generally available to members of the public.

Dubai and Hong Kong sign cooperation agreement

Aug 30 2017

By Jonathan Lawrence

On 28 August, the Dubai Financial Services Authority (DFSA) and the Securities and Futures Commission (SFC) of Hong Kong entered into a co-operation agreement to establish a framework for mutual assistance to keep abreast of the development and application of FinTech in their jurisdictions. Under the agreement, the SFC and the DFSA will cooperate on information sharing, potential innovation projects and referrals of innovative firms seeking to enter one another’s markets.

The agreement follows the launch of:

the SFC’s FinTech Contact Point in March 2016 to enhance communication with businesses involved in the development and application of FinTech and RegTech in Hong Kong. Its purposes is to facilitate the FinTech and RegTech community’s understanding of the current regulatory regime in Hong Kong and to enable the SFC to stay up to date with industry developments; and
the DFSA’s regulatory FinTech regime (see some of our earlier posts on FinTech in Dubai – crowdfunding, accelerator and innovation testing licences)

Faster Payments Task Force issues Part Two of Final Faster Payments Report

Aug 29 2017

By Eric A. Love and Judith Rinearson

The Faster Payments Task Force (the Task Force) has issued part two of its Final Report that sets forth a blueprint for achieving faster and more secure payments in the U.S. by 2020.

Convened by the Federal Reserve Board (FRB) and comprised of a broad cross-section of over 300 industry, government and consumer group stakeholders, the Task Force released part one of its Final Report in January 2017 which outlined the Task Force’s goals and the many advantages of faster payments. Instead of championing a single method to achieving “ubiquitous faster payments,” the Task Force states in part two that it favors competition among a wide array of potential ways to achieve this goal and supports collaboration with industry stakeholders to ensure “broad adoption; safety, integrity and trust; and interoperability.”

Monetary Authority of Singapore on Initial Coin Offerings

Aug 29 2017

By Judith Rinearson and Rizwan Qayyum

On August 10, 2017, the Monetary Authority of Singapore (MAS) and the Commercial Affairs Department (CAD) jointly published a Consumer Advisory document which urged consumers to exercise due diligence before investing in digital tokens, with particular emphasis on the emergence of Initial Coin Offerings (ICOs). In Singapore, several ICOs have taken place in the past year and this has resulted in organisations raising millions of dollars in a few days since their launch.

An ICO is a crowdfunding method, facilitated by blockchain, through which a project or venture, usually a start-up organisation, raises funding by creating and selling its own digital asset, currency or token in exchange for digital currencies or assets of immediate value such as a Bitcoin. The practice is thus far unregulated and enables a new brand of alternative finance. An ICO campaign ‘runs’ for a defined period during which investors are able to support the project, with the aspiration that this digital asset becomes successful and their investment reaps profit.

APRA proposes reforms to the ADI Licencing Regime

Aug 23 2017

By Jim Bulling and Felix Charlesworth

On 15 August 2017, the Australian Prudential Regulating Authority (APRA) published a discussion paper entitled ‘Licensing: A phased approach to authorising new entrants to the banking industry‘. The Discussion Paper proposes changes to APRA’s licensing framework with the introduction of a new restricted ADI licences regime.

This phased approach enables entrants who require time to build resources and capabilities, such as fintech start-ups, to conduct banking related business by reducing conventional barriers to entry such as the requirement to hold at least $50 million in start-up capital.

Better late than never to the FinTech party

Aug 17 2017

By Cameron Abbott and Olivia Coburn

Oracle has finally realised that it wants to hang out with the cool FinTech kids on the block, having recently announced the release of its Oracle Banking Payments application programming interface (API) service.

Oracle’s move recognises the value of offering better ways for its banking clients to collaborate with FinTechs and other third parties.

RegTech and AML: New UK Report

Aug 14 2017

By Jonathan Lawrence

The UK Financial Conduct Authority (FCA) published a report on 2 August entitled “’New Technologies and Anti-Money Laundering Compliance”. The report details findings of three months of research by the authors PA Consulting. The work included over 40 interviews with regulated firms, technology providers, and other bodies. The report sets out respondents’ views on topics such as:

What are the key functions of new and emerging technologies related to anti-money laundering (AML) compliance, and how can they aid compliance activities?
What challenges do firms face in introducing new technologies?
What good practice examples and lessons are available for firms considering new compliance technologies?
What steps could the FCA take to encourage more innovation in AML compliance?

All in this together: New FinTech partnership in Abu Dhabi

Aug 11 2017

By Jonathan Lawrence

On 7 August, Abu Dhabi Global Market (ADGM), the International Financial Centre (IFC) in Abu Dhabi, and the Responsible Finance & Investment Foundation (RFI), a think tank for responsible finance, announced their entry into a partnership to help the growth and sustainability of the FinTech ecosystem through financial inclusion and ethical and responsible finance practices.

Both parties said that they would like to encourage entrepreneurship, foster ethical and responsible investments, and highlight opportunities for Islamic-compliant FinTech services and Islamic finance activities for the region and beyond. They will highlight emerging FinTech trends and support the development of innovative Shari’ah-compliant FinTech companies seeking to participate in the Middle East and African markets. The collaboration establishes an open platform for both RFI and ADGM to share expertise and knowledge and they say they will also work closely to enable and assist investors, FinTech entrepreneurs and innovation firms in testing and introducing innovative products, services and solutions. This will take place in the environment of the ADGM Reglab programme, a regulatory laboratory to accelerate FinTech Innovation.