risk – FinTech and Blockchain Law Watch

New FCA “Dear ICO” Letter warns of financial crime associated with cryptocurrencies

Jun 14 2018

By Judith E. Rinearson and Rizwan Qayyum

On June 11 2018, the Financial Conduct Authority (the “FCA”) issued a “Dear CEO” letter, which provided guidance for banks on how to handle the growing risks associated with “cryptoassets”.

The FCA defines “cryptoassets,” using Bitcoin and Ether as an example, as “any publicly available electronic medium of exchange that features a distributed ledger and a decentralised system for exchanging value.” While acknowledging that there are “many non-criminal motives” for using cryptoassets, the letter asserts that these products can be abused because they offer “potential anonymity and the ability to move money between countries.”

Goldman Accelerates FinTech Disintermediation

Sep 09 2016

By Susan Altman

Goldman Sachs, in a dramatic sign of the times, has recently started giving its clients for free the very software tools that made Goldman a global trading powerhouse, per the Wall Street Journal. A decade ago, Goldman considered licensing the software to rival Deutsche Bank and threw around licensing values in the billions of dollars. Now it’s free, at least for customers. The software, known as Securities DataBase, or SecDB, remains Goldman’s prime tool for measuring securities risk and analyzing their prices and is used to analyze potential trades. Why the change? Some experts point the finger at new regulations limiting the banks’ trading risks and making it costly to hold large inventories of stocks and bonds on their books. In addition, electronic trading and research has squeezed margins across the financial industry. In an effort to build its customer base, Goldman plans to make the web-based application available to customers who can then customize and operate the tools on their own. Goldman joins many others in offering its own risk-management system to customers, including startups and big players like BlackRock. It seems like every Fin is now a Tech as well.

The Financial Stability Board’s fintech priority for 2016

Mar 16 2016

By Jim Bulling and Michelle Chasser

The Chair of the Financial Stability Board (FSB), Mark Carney, has sent a letter to G20 finance ministers and central bank governors outlining the FSB’s priorities for 2016.

One of the five priorities is to assess the implications of fintech innovations and systemic risks that may arise from operational disruptions. The FSB is currently evaluating potential financial stability implications of fintech for the financial system as a whole. The findings of this evaluation will be discussed at the FSB’s March Plenary meeting.

The letter also acknowledged that a number of fintech innovations are now receiving close attention and that the regulatory framework must be able to manage any systemic risks without stifling innovation.

Any decisions made by the FSB following the assessment are likely to have a flow on effect to how G20 members including the US, the UK, Australia and the EU regulate the fintech sector.

The Chair’s letter can be found here.

Robo-Advice Risks and Benefits

Dec 15 2015

By Jim Bulling and Michelle Chasser

The Joint Committee of the European Supervisory Authorities (JCESA) is considering what regulations, if any, will be required for robo-advice throughout the European Union (EU). JCESA has released a discussion paper on automation in financial advice to assist it evaluate how robo-advice is currently being used in the EU and its potential growth in banking, securities and insurance. The discussion paper highlights what the JCESA identify as the main potential benefits and risks to both consumers and financial institutions which offer some form of robo-advice.

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