The Financial Stability Board has published a report on the use of decentralized financial technologies and the implications these may have for financial stability, regulation and governance. The report has been delivered to G20 Finance Ministers and Central Bank Governors ahead of the G20 meeting on June 8-9, 2019.

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The Financial Stability Board has published a report on crypto-assets outlining the actions being undertaken by various international organizations in response to the challenges posed by crypto-assets and the FSB's own proposed course of action for the year ahead. The report will be delivered to G20 Finance Ministers and Central Bank Governors at the next G20 meeting in Japan on June 8-9, 2019.

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The U.S.-U.K. Financial Regulatory Working Group has announced the establishment of a Financial Innovation Partnership between the U.S. and the U.K. The objective of the Partnership is to strengthen bilateral engagement on emerging trends in financial services innovation. It will focus on regulatory engagement and commercial engagement by providing opportunities for the private sector in one country to engage with industry associations and market participants in the other country.

The U.S.-U.K. Financial Regulatory Working Group, formed in April 2018, is a forum for treasury staff and financial regulatory authorities to exchange views on the regulatory relationship between the United States and the U.K. The objectives of the Working Group are to further financial regulatory cooperation, improve transparency, reduce regulatory uncertainty, identify possible cross-border implementation issues, address regulatory arbitrage and work towards achieving compatibility of U.S. and U.K. laws and regulations.

View the announcement.

The U.K. Financial Conduct Authority has published a Call for Input on a Cross-Sector Sandbox, seeking input on whether a U.K. cross-sector sandbox is needed. The FCA has observed that due to emerging technologies, business models are constantly changing in all markets and that firms are diversifying into different sectors. In addition, across all sectors, firms are increasingly using big data. As a result, the FCA believes that the different sectoral U.K. regulators need to find new practical ways of collaborating. The FCA recently undertook a study into how a cross-sector sandbox involving multiple regulators could be established, engaging with a range of regulators, such as the Civil Aviation Authority, the Gambling Commission, the Information Commissioner's Office, Ofcom, Ofgem and the Prudential Regulation Authority, a small group of firms and other stakeholders. The study showed that there is potential for a cross-sector sandbox, but that further discussion is needed to understand the degree of interest and need before an operating model can be developed.

Based on the success of the FCA's financial regulatory sandbox, the FCA suggests that a cross-sector sandbox would provide a single-point-of-entry sandbox for firms to test innovative propositions with multiple U.K. regulators. The FCA acknowledges that challenges exist to its proposal, including uncertainties about demand for the sandbox and a misunderstanding of its purpose. However, it is of the view that most of the challenges could be overcome or mitigated, as has been the case with its existing sandbox. The FCA has published the Call for Input to facilitate further discussions on the concept of a cross-sector sandbox. Responses are invited until August 30, 2019.

View the call for input on a cross-sector sandbox.

The European Banking Authority has published its annual report for 2018, setting out details of the work it undertook in 2018 and its focus areas in 2019. The EBA will, in 2019, focus on: (i) finalizing the guidelines on loan origination as part of its contribution to tackling non-performing loans in the EU; (ii) implementing the changes arising from the revised Capital Requirements Regulation, which was published in the Official Journal of the European Union on June 7, 2019; (iii) implementing the new Investment Firm Regulation and Directive by preparing various technical standards, guidelines and reports; (iv) preparing technical standards and guidelines, as required under the EU Securitization Regulation, that facilitate the use of internal models for banks investing in securitization positions; (v) assisting with the EU's implementation of Basel IV; (vi) the impact of FinTech, in particular, on payment institutions' and e-money institutions' business models; (vii) identifying regulatory and supervisory areas affected by the use of big data and developing best practices and principles for the application and implementation of data analytics by institutions; (viii) continuing to assess the risks of crypto-assets; (ix) supporting the European Commission's work on sustainable finance; and (x) improving the supervision of anti-money laundering and counter terrorism financing.

View the EBA's annual report 2018.

The International Organization of Securities Commissions has launched a consultation on the key issues to consider for regulating crypto-asset trading platforms (referred to as CTPs). The consultation paper, which aims to assist IOSCO member jurisdictions to assess the issues and risks relating to CTPs, is based on information obtained from national regulators on the operation of CTPs and their current or proposed regulatory approaches. The consultation does not cover Initial Coin Offerings, focussing instead on the secondary markets. Responses to the consultation are due by July 29, 2019.

The consultation paper describes certain issues and risks related to trading of crypto-assets on CTPs. The paper also sets out key considerations and corresponding toolkits for each consideration. The considerations are: (i) access to CTPs; (ii) safeguarding assets; (iii) conflicts of interest; (iv) operations of CTPs; (v) market integrity; (vi) price discovery; and (vii) technology. The toolkits are for regulators to use to address the key considerations and related issues and risks. In addition, IOSCO notes that useful guidance on the issues is already available in its Objectives and Principles of Securities Regulation and the Assessment Methodology.

View the consultation paper.

The UK Jurisdiction Taskforce has published a consultation paper on key issues of legal uncertainty regarding cryptoassets, distributed ledger technology and smart contracts. The UKJT is involved in preparing an authoritative legal statement on the status of cryptoassets and smart contracts under English private law. The final statement will consider whether English private law sufficiently covers cryptoassets, DLT and smart contracts and where legal uncertainty may arise. The issues in the consultation are limited to English private law and do not include any issues on regulatory characterization, taxation, criminal law, partnership law, data protection, consumer protection, settlement finality, regulatory capital, anti-money laundering or counter-terrorist financing.

UKJT is part of the LawTech Delivery Panel, which was established in 2018, with the aim of identifying barriers and opportunities for growth. The consultation closes on June 21, 2019.

View the consultation paper.

HM Treasury launched a consultation on its proposed options for transposing the Fifth Money Laundering Directive into U.K. law. 5MLD makes a number of changes to the European Anti-Money Laundering and Counter-Terrorist Financing regime set out in the Fourth Money Laundering Directive. EU Member States are required to transpose 5MLD into national laws, which must take effect by January 10, 2020. HM Treasury is consulting on how it proposes to effect the transposition, in particular where the U.K. has discretion as to how certain aspects are implemented and where gold plating provisions are proposed. Notably, the U.K. government intends to implement 5MLD irrespective of when the U.K. leaves the EU, and is committed to implementing the Financial Action Task Force's standards, focusing on those areas highlighted in the FATF's mutual evaluation report of the U.K.'s AML/CTF regime. Responses to the consultation were to be submitted by June 10, 2019.

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While speaking before the D.C. Blockchain Summit, Commodity Futures Trading Commission Chairman J. Christopher Giancarlo discussed the relationship between technology, regulation and markets, and described the steps the CFTC has taken to stay in step with innovations that have posed regulatory challenges.

Chairman Giancarlo touted the potential for such technological innovations, including blockchain and digital ledger technology, to transform the way that regulators gather information and lower operational costs for financial institutions. Interestingly, Chairman Giancarlo argued that blockchain and DLT could have helped regulators gather real-time trading data during the 2008 financial crisis, which he believes at a minimum could have prompted "better-informed" and "more calibrated regulatory intervention."

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The Financial Conduct Authority has published a "Dear CEO" letter addressed to loan-based peer-to-peer crowdfunding platforms requesting the platforms to review their wind-down arrangements. The FCA implemented rules regulating FCA-authorized firms operating investment-based and loan-based crowdfunding platforms on April 1, 2014. Investment-based crowdfunding is governed by the Markets in Financial Instruments package and the Alternative Investment Fund Managers Directive, as transposed into U.K. law. The regime for P2P lending is a national one and is less detailed and prescriptive.

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On February 27-28^th, the Basel Committee on Banking Supervision met to discuss policy and supervisory issues, and the extent to which members had implemented post-financial crisis reforms.

The Committee noted the implementation status of margin requirements for uncleared derivatives and it will publish in March a joint statement with the International Organization of Securities Commissions on certain implementation aspects of margin requirements.

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The Financial Action Task Force has published the outcomes from its Plenary meeting that took place in Paris on February 20-22, 2019. The FATF considered key issues such as the operations and streamlining of the FATF, major and other strategic initiatives and mutual evaluations.

One of the major strategic initiatives covered by the Plenary was the FATF's work on mitigating money laundering and terrorist financing risks associated with virtual asset activities. The FATF published an amended Recommendation 15 in October 2018, clarifying that its standards apply to exchanges, wallet providers and providers of financial services for Initial Coin Offerings. The FATF has now published a draft Interpretative Note to Recommendation 15 to further clarify how the FATF Standards apply to activities involving virtual assets. The Interpretative Note has been finalized except for one section, which will be the subject of a public consultation in May this year. That section concerns the duty of virtual asset service providers to obtain and hold originator and beneficiary information on virtual asset transfers and submit such information to beneficiary service providers and counterparts (if any) as well as provide it on request to appropriate authorities. Following the consultation, the FATF intends to fully finalize the Interpretative Note and adopt it in June 2019.

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The U.S. Conference of State Bank Supervisors (CSBS), the nationwide organization of financial regulators from all fifty U.S. states, the District of Columbia, Guam, Puerto Rico, American Samoa, and the U.S. Virgin Islands, has released a series of action items to implement recommendations received from the CSBS Fintech Industry Advisory Panel. The panel was established in 2017 to help streamline multistate regulation of FinTech businesses and other nonbanks, and comprises thirty-three companies, including FinTech firms like SoFi, Ripple, and Circle. The panel also contains two subgroups: one focused on the lending industry; and the other focused on the payments industry.

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The Financial Stability Board has issued a report assessing the potential impacts of certain FinTech market developments on financial stability. Specifically, the report examines the potential implications of: (i) FinTech firms competing with traditional financial services providers; (ii) the provision of financial services by some of the world's largest technology companies (referred to as "BigTech" firms); and (iii) reliance on third-party providers for cloud services.

Although the report finds that the relationship between FinTech firms and financial institutions has been mostly complementary to this point, it also shows that FinTech firms have started to chip away at financial institutions' market share in certain industries, such as credit provision and payments. Further, the report posits that the entry of BigTech firms into the financial services space could also have significant competitive impacts, as such firms often have large, established customer bases, brand recognition, strong financial positions and access to low-cost capital, which could allow them to quickly achieve scale in the space. While this could lead to greater competition in the short-term, the FSB hypothesizes that cross-subsidization could allow BigTech firms to operate with lower margins and gain greater market share, which could in the long run lead to a less competitive market (e.g. China, where two firms account for 94% of the mobile payments market). Additionally, according to the report, increased competition over time could also press incumbent financial institutions to take on additional risk in order to maintain margins and profitability, which could have subsequent effects on financial stability.

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The U.K. Financial Conduct Authority has launched a consultation on proposed Guidance on whether certain crypto-assets fall within the U.K.'s regulatory perimeter (CP19/3). The FCA's consultation is in response to one of the commitments made by the U.K. Cryptoasset Taskforce last year in its final Cryptoassets Report. The Taskforce was established in March 2018 and comprises representatives from HM Treasury, the FCA and the Bank of England. The FCA's consultation closes on April 5, 2019. The FCA intends to publish the final Guidance on the existing regulatory perimeter in relation to crypto-assets by summer 2019.

The FCA's proposed Guidance is intended to help firms determine whether certain crypto-assets fall within the FCA's regulatory perimeter. However, the FCA notes that assessing whether a crypto-asset is within the perimeter can only be done on a case-by-case basis and that the responsibility for ensuring that it has the correct permissions lies with the firm undertaking the activity. A firm that undertakes a regulated activity without the requisite permissions will be in breach of the 'general prohibition' in the Financial Services and Markets Act 2000. Any such breach by a person is a criminal offence and the person may be imprisoned or fined, or both. The consultation is relevant to a wide range of consumers, stakeholders and firms, in particular firms that issue or create crypto-assets, firms that market, sell, buy, hold or store crypto-assets, financial advisors, investment managers and investment exchanges.

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Following its consultation from March to June last year, the Basel Committee on Banking Standards has announced the final revisions to the Basel III market risk capital framework. At the same time, it has also announced its 2019 priorities.

The objective of the Basel market risk framework is to ensure that banks hold enough regulatory capital to protect against losses arising from movements in market prices of instruments held in their trading book. Certain changes to the 2016 market risk framework are to:
 

1. Clarify the scope of application. The Committee has provided further guidance on the regulatory book to which instruments should be assigned in circumstances where instruments could go into more than one book and has revised the treatment of structural foreign currency positions. The revised framework also allows equity investments in funds to be allocated to the trading book, provided that a bank: (i) is able to "look through" to the fund's underlying assets; or (ii) has access both to daily price quotes and to the information contained in the mandate of the fund.
2. Revise the internal model approach to address implementation challenges, in particular, by amending the profit and loss attribution (PLA) test metric and failure consequence.
3. Amend the standardized model approach. The approach to measuring risk factor losses was too high in relation to the actual risk and there was unnecessary operational burden. The changes in the standardized approach include widening the scope of currency pairs that are considered liquid in the FX risk class to ensure more currency pairs are subject to lower risk weights and introducing new "index" buckets for equity and credit spread risks so that each underlying position in an index does not need to be identified.

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The European Securities and Markets Authority has published a report on the application and suitability of the EU securities regulatory framework to crypto-assets, including Initial Coin Offerings. The report is in response to the European Commission's request in its FinTech Action Plan 2018. Like the European Banking Authority, which published a report on the same day in relation to banking sector issues, ESMA found that EU activities related to crypto-assets are fairly low and do not present any financial stability risks.

ESMA's report focuses on the legal qualification of crypto-assets under EU financial securities laws and highlights that this may differ across EU member states because it will be subject to the national laws implementing EU legislation. ESMA notes that there is currently no legal definition of crypto-assets and that a key consideration is whether a crypto-asset qualifies as a financial instrument under the revised Markets in Financial Instruments package. Where a crypto-asset qualifies as a MiFID financial instrument, the full requirements under various securities legislation may apply, subject to any applicable exemptions.  According to ESMA, the rules in the Prospectus Directive would apply to an issue of crypto-assets offered to the public, including through an ICO, where the instruments are transferable securities. 

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The European Banking Authority has published a report on the application and suitability of the EU bank regulatory framework for crypto-assets. The report is in response to the European Commission's request in its FinTech Action Plan 2018. The report confirms that EU activities related to crypto-assets are fairly low and do not present any financial stability risks. The European Securities and Markets Authority also published a similar report covering Initial Coin Offerings issues within its remit on the same day.

The EBA's report sets out the EBA's findings, the issues arising from the results, the EBA's advice to the Commission and the steps that the EBA intends to take in 2019. The EBA mapped the applicability to crypto-assets and crypto-asset activities of the EU Anti-Money Laundering Directive, the Capital Requirements Directive and Regulation, the second Electronic Money Directive and the second Payment Services Directive.

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Fulfilling the mandate in the European Commission's March 2018 FinTech Action Plan, the Joint Committee of the European Supervisory Authorities has published a report on regulatory sandboxes and innovation hubs, together referred to as innovation facilitators. Innovation hubs are a dedicated point of contact for firms raising queries with national regulators on FinTech-related issues. Regulatory sandboxes enable firms to test innovative financial products, services or business models under the supervision of a national regulator.

The ESAs' report states that most EU member states have one or both forms of these innovation facilitators. The facilitators operate at national level and the ESAs identify this as a potential challenge to the EU objective of scaling-up FinTech. For example, national regulators are likely to adopt different approaches to the same innovation which can hinder opportunities for extending an innovation across the EU as well as present regulatory arbitrage risks. The potential absence of passporting innovative products throughout the EU can raise issues for their users.

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The Consumer Financial Protection Bureau has proposed revisions to the agency’s No-Action Letter policy and floated the idea of a federal regulatory sandbox. The proposed NAL policy would simplify and clarify the agency’s existing procedures for obtaining a NAL, while the sandbox would streamline the process for firms that seek regulatory relief when they roll out innovative products or services.

The CFPB’s proposed NAL policy would supplant the agency’s existing policy, which was implemented in 2016. Under the current policy, the CFPB has only provided one NAL. To encourage more applications for NALs, the CFPB is proposing to streamline the NAL application and review processes by eliminating several redundant or overly burdensome requirements, such as data-sharing requirements. The updated NAL policy would also eliminate assumed time-period limitations on NALs and place an emphasis on coordination with other regulators that offer NALs or similar forms of relief.

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The Financial Conduct Authority has published its final document, entitled "FCA Mission: Approach to Authorisation," explaining the purpose of authorization and the FCA's approach to it. The paper sets out details of the FCA's approach to: (i) evaluating whether firms meet the requisite Threshold Conditions and assessing whether individuals are "fit and proper"; (ii) how the FCA uses authorization to promote competition; and (iii) revoking authorization.

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To further its understanding of Ether and its use on the Ethereum Network, the Commodity Futures Trading Commission has issued a request for input on several topics related to the virtual currency. The RFI poses a number of questions on Ether, including, among other things, its functionality, underlying technology, governance, markets, cybersecurity and custody. In addition, the CFTC asks several questions regarding Ether's susceptibility to market manipulation and the potential introduction of Ether derivatives contracts.

The CFTC stated that the requested feedback will inform the work of the CFTC and its LabCFTC initiative to enhance the agency's oversight of virtual currency markets and develop regulatory policy. The CFTC also noted that it hopes to gain a greater understanding of the similarities and differences between Ether and bitcoin, along with potential risks and opportunities uniquely posed by Ether.

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The European Commission has published a press release on the outcome of the first EU Blockchain Industry Roundtable, which took place on November 20, 2018. The press release notes the establishment of the "International Association for Trusted Blockchain Applications" that will be open to any firm that wishes to contribute to the use of blockchain and distributed ledger technologies in the EU. This new Association will work with the European Commission and EEA states that are part of the European Blockchain Partnership to support interoperability, develop specifications and promote standards and regulatory convergence in this area. The European Blockchain Partnership was established earlier this year and has been signed up to by Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden and the U.K.

View the press release.

View details of the European Blockchain Partnership.

The Bank of England, the Bank of Canada and the Monetary Authority of Singapore have published a joint report entitled, "Cross-Border Interbank Payments and Settlements." Referring to current industry projects to address existing problems in cross-border payments affecting end-users, commercial banks and central banks, the report analyzes these issues and discusses proposed new models for processing cross-border transactions. The report sets out three models for cross-border payments and settlements and discusses the key considerations and dependencies of each model. Each model is then assessed against the existing identified challenges in cross-border payments.

Model 1 is based on existing plans to enhance the current systems within and across jurisdictions, which is considered to be the baseline for discussions. Model 2 is based on an expanded role for domestic real-time gross settlement infrastructure, which would be "super-correspondents" in settling cross-border payments and would replace existing correspondent banks. Model 3 has three variations, all of which are based on cross-border payments between banks being settled with wholesale central bank digital currencies (W-CBDCs). The three variations are: (i) W-CBDCs that can be held and exchanged only in their home jurisdiction; (ii) W-CBDCs held and exchanged within and beyond their home jurisdictions; and (iii) a single universal W-CBDC backed by a basket of currencies issued by participating central banks.

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The U.K. Crypto-Assets Task Force has published its Final Report. Established in March 2018 by the U.K. Chancellor of the Exchequer as part of the U.K. government's FinTech Sector Strategy, the Task Force comprises representatives from HM Treasury, the U.K. Financial Conduct Authority and the Bank of England.

The Task Force engaged with over 60 firms and other stakeholders to seek their views on topics including: the trajectory of the industry, the risks, benefits and underlying economic value of crypto-assets and the U.K.'s future regulatory approach. Stakeholders were of the view that there is a lack of regulatory clarity in the U.K. and that regulation should be introduced to support the legitimate players in the crypto-assets market. It is also crucial in mitigating risks. There were also calls for regulatory and tax frameworks to be aligned.

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The Conference of State Bank Supervisors has sued the U.S. Office of the Comptroller of the Currency to prevent it from granting charters for special purpose national banks to non-depository FinTech companies. The CSBS is the nationwide organization of state banking regulators in the United States.

The CSBS filed the lawsuit upon the OCC’s announcement on July 31, 2018 that it would begin accepting these applications. The CSBS previously sued the OCC over its ability to provide SPNB charters in April 2017. The federal district court in D.C., however, dismissed the first suit for lack of subject matter jurisdiction and ripeness, stating that the OCC had not decided whether to grant SPNB charters to FinTech firms at that time.

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The European Banking Authority has published its Work Programme for 2019, setting out details of, and planned main outputs from, 37 separate work streams across the following five key strategic priorities:
 

1. Leading the Basel III implementation in the EU.
2. Understanding risks and opportunities arising from financial innovation.
3. Collecting, disseminating and analyzing banking data.
4. Ensuring a smooth relocation of the EBA to Paris.
5. Fostering the increase of the loss-absorbing capacity of the EU banking system.

The EBA also confirms that work related to Brexit will remain a horizontal priority for the EBA in 2019 and explains that the EBA's other activities may be affected in the future by Brexit-related developments. Should that be the case, any substantial change in the work programme will be communicated in due time, in order to seek steering and approval from its Management Board and Board of Supervisors.

View the EBA's 2019 Work Programme.

The European Commission has published a Communication, outlining its work plan for 2019. The Communication is addressed to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions. The Communication discusses the ongoing challenges for the EU in the run-up to the European Parliamentary elections and the post-Brexit Summit in Sibiu at which a new multi-annual framework for the EU27 will be finalized.

Separately published Annexes to the Communication relating to: (i) new initiatives; (ii) REFIT initiatives; (iii) priority pending proposals; (iv) legislative initiatives that have been withdrawn; and (v) a list of envisaged repeals. Priority pending proposals of particular relevance to financial institutions include legislative proposals relating to the forthcoming sustainable finance package, cross-border distribution of collective investment schemes, crowdfunding, amendments to the European Market Infrastructure Regulation, prudential regulation and supervision of investment firms and a proposed amending regulation relating to minimum loss coverage for non-performing exposures.

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The European Securities and Markets Authority has published an own-initiative report prepared by its Securities and Markets Stakeholder Group. The purpose of the report is to provide advice to ESMA on steps it might take to contain the risks of Initial Coin Offerings and crypto-assets, on top of existing regulation.

In the report, the term “crypto-assets” is used to refer to coins, tokens, virtual and cryptocurrencies or other digital or virtual assets collectively. The acronym "ICO" is used to refer to an initial offering of any crypto-asset. The report sets out a taxonomy of crypto-assets, based on the distinction between payment tokens, utility tokens, asset tokens and hybrids used by the Swiss Financial Market Supervisory Authority (FINMA).

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The U.K. Financial Conduct Authority has launched the Green FinTech Challenge for firms developing innovative products and services to assist in the U.K.’s transition to a low-carbon economy. The Challenge is part of the FCA's Innovate project. Successful applicants to the challenge will benefit from authorization support, live testing in the regulatory sandbox and FCA guidance. Applications for inclusion in the challenge should be submitted by January 11, 2019 and successful applicants will be notified by the end of Q1 2019. This is the first FinTech challenge run by the FCA and is separate from the FCA's other Innovate services, which should continue to be accessed by firms developing propositions that fall outside the scope of the challenge. Once the challenge is complete, it will consider whether to launch more challenges.

View the FCA's Green FinTech Challenge webpage.

The Securities and Exchange Commission has launched its Strategic Hub for Innovation and Financial Technology (FinHub), designed to engage investors and market participants on FinTech issues and initiatives.

Valerie A. Szczepanik, the SEC's Senior Advisor for Digital Assets and Innovation and Associate Director in the SEC's Division of Corporation Finance, will lead FinHub, which will focus on topics such as distributed ledger technology (DLT) and digital assets, automated investment advice, digital marketplace financing, artificial intelligence and machine learning. The SEC's various divisions will assign staff with expertise in the FinTech space. inHub will replace and build on the efforts of several of the SEC's internal FinTech working groups.

The SEC said that FinHub will provide a platform for market participants to engage directly with SEC staff on innovations and technological developments, publicize the SEC's FinTech-related activity on the FinHub webpage, host FinTech events (including a forum on DLT and digital assets planned for 2019) and act as a resource for SEC staff to acquire and disseminate FinTech-related information within the agency. Further, it will serve as the SEC's liaison to domestic and global regulators in respect of innovations in financial, regulatory and supervisory systems.

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The U.K. Financial Conduct Authority has published a Feedback Statement on the Digital Regulatory Reporting project it began earlier in 2018. The Feedback Statement summarizes the feedback the FCA received from the call for input it published in January 2018 and sets out the FCA's responses.

The FCA is working with the Bank of England in the RegTech sphere to explore ways of using technology to link regulation, compliance procedures and firms' policies and standards together with firms' transactional applications and databases. Most respondents to the FCA's call for input agreed in particular that digital regulatory reporting could bring increased efficiency, among other benefits. Some respondents expressed concerns about costs of implementation and called for a period of overlap were digital regulatory reporting to be introduced. Overall, the FCA is encouraged by the feedback.

The Feedback Statement confirms that participants to a pilot launched in June 2018 to further explore the proof of concept for a move to digital regulatory reporting will publish their findings in a technical paper in Q1 2019. The FCA will continue with workstreams under the project and should a business case be made, it will launch a consultation and a cost benefit analysis. While the FCA is focusing on implementation of digital regulatory reporting in the U.K., it also believes that multinational adoption could bring benefits and is in discussions with its counterparts internationally.

View the Feedback Statement (FCA FS 18/2).

View details of the FCA's call for input.

View details of the terms of reference for the project's pilot phase.

Commodity Futures Trading Commission Commissioner Brian Quintenz has given a wide-ranging speech at the GITEX Technology Week Conference in Dubai addressing a number of key issues faced by the CFTC in considering how to regulate smart contracts. While he acknowledged that there are still many questions to be answered on smart contract regulation, Commissioner Quintenz expressed a number of important views that should make market participants pause before assuming that activity in smart contracts will avoid CFTC scrutiny.

Commissioner Quintenz explained that, in his view, the first step the CFTC should take when considering a smart contract is to understand the basic nature of the contract and whether it is within the CFTC's jurisdiction. For example, is the contract a product that must be traded on an exchange? Does the protocol itself perform the functions of an exchange, which may trigger registration requirements? While the answers will of course be different for every smart contract, Commissioner Quintenz made clear that he believes existing CFTC regulations can and should be applied to such contracts where appropriate.

Read more.

The U.K. Financial Conduct Authority has announced that the application window has opened for cohort five of its regulatory sandbox. The FCA announced the successful applicants to the previous cohort in July 2018.

The FCA's sandbox is part of the FCA's Project Innovate, which was launched in 2014.  The regulatory sandbox has been in operation since 2016 and provides a controlled environment for firms that satisfy the relevant eligibility criteria to test innovative products and services with real customers.

The deadline for completed applications for cohort five is November 30, 2018.

View the FCA webpage.

View details of the successful applicants to cohort four.

The U.K. Financial Conduct Authority has published a Discussion Paper on climate change and green finance in which it calls for comment on potential changes to its regulatory approach in these areas. The Discussion Paper sets out specific action that the FCA intends to take in the short term in four focus areas - capital markets disclosures, public reporting requirements, green finance and pensions.

First, the FCA is considering whether the regulatory approach to disclosures by issuers in the capital markets should be amended. In particular, the FCA is asking for comments on: (i) the difficulties that issuers may have in determining materiality of climate-related issues such that a specific disclosure would be warranted; (ii) whether investors would benefit from greater comparability of disclosures; (iii) whether further prescribed requirements on climate-related disclosures should be introduced to facilitate more consistent disclosures by issuers. This final point includes whether the introduction of a "comply or explain" approach to the Task Force on Climate-related Disclosures would facilitate more effective markets.

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The Financial Stability Board has published a report entitled "Crypto-asset markets: Potential Channels for future financial stability," in which it outlines its findings following its assessment of the crypto-asset markets in 2018.

The FSB has considered the primary risks present in crypto-assets markets as low liquidity, volatility, leverage risks, as well as technological and operational risks (including cyber security risks). The FSB considers that crypto-assets lack the key attributes of sovereign currencies and do not serve as a common means of payment, a stable store of value or a mainstream unit of account. Based on the available information, the FSB considers that crypto-assets do not pose a material risk to global financial stability at this time. However, the FSB's report highlights that there could be financial stability implications from these primary risks through a variety of transmission channels including: (i) confidence effects; (ii) financial institutions' exposures to crypto-assets, related financial products and entities that are financially impacted by crypto-assets; (iii) the level of market capitalisation of crypto-assets; and (iv) the extent of their use for payments and settlements.

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The Joint Committee of the European Supervisory Authorities (that is, the European Banking Authority, the European Securities and Markets Authority and the European Insurance and Occupational Pensions Authority) has published its 2019 Work Programme. EIOPA will Chair the Joint Committee in 2019. The Work Programme provides details of the Joint Committee's key workstreams for 2019.

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The Commodity Futures Trading Commission and the Australian Securities and Investments Commission have signed an arrangement designed to support cross-border FinTech innovation through their respective FinTech initiatives, LabCFTC and the ASIC Innovation Hub. The arrangement will facilitate information sharing between the two regulators in respect of emerging trends and developments, regulatory issues pertaining to FinTech innovations and best practices, among other things. It also includes a referral mechanism that will allow the CFTC and ASIC to refer to one another innovators that wish to operate or have questions about operating in the other's jurisdiction. The arrangement further calls for joint proofs of concept, trials and innovation competitions, where permitted, as well as periodic meetings to update each other on FinTech and RegTech trends and developments of common interest.

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The European Parliament has adopted a non-legislative resolution entitled "distributed ledger technologies and blockchains: building trust with disintermediation." Of particular relevance to the financial services sector, the European Parliament is requesting that the European Commission and other EU authorities take various steps to maximize the potential of this technology in the EU.

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The U.S. District Court for the District of Massachusetts issued an order confirming that the Commodity Futures Trading Commission maintains the authority to police virtual currency fraud. The order was issued in response to a motion to dismiss charges against My Big Coin Pay, Inc. and several individuals for operating a fraudulent virtual currency scheme through which they solicited customers to purchase a virtual currency known as My Big Coin (MBC).

The CFTC's initial enforcement order, filed in January 2018, accused the defendants of operating a fraudulent virtual currency scheme through which they solicited more than $6 million from customers throughout the U.S. by making false and misleading claims that MBC was actively being traded, was backed by gold and could be used anywhere MasterCard credit cards were accepted. The defendants also were alleged to have misrepresented MBC's daily trading price in reports on its website, when no daily trading price existed because MBC was not actively being traded.

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The U.K. House of Commons Treasury Committee has published a report calling for crypto-assets to be regulated in the U.K. as a matter of urgency. The Treasury Committee considers that the current "ambiguity of the UK Government and regulators' position is clearly not sustainable" and is recommending that an amendment be made to the Regulated Activities Order to bring crypto-assets within the U.K. regulatory perimeter, supervised by the Financial Conduct Authority. The Committee does not specify in the report the activity related to crypto-assets that should go into the RAO, but recommends that it should at least include the issuance of crypto-assets through Initial Coin Offerings and the provision of crypto-exchange services. This will, according to the Committee's report, address anti-money laundering risks and consumer protection, aligning investor protections with those adopted in the U.S.

The Committee is also seeking various actions by the Government and the U.K. regulators.

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The Basel Committee on Banking Supervision has published a press release summarizing the outcome of its meeting on September 19-20, 2018. The Committee committed to consider Pillar 1 and Pillar 3 measures to prevent banks adjusting their balance sheets around regulatory reporting dates to manipulate reported leverage ratios. In addition, the Committee intends to further analyze banks' exposures to crypto-assets to reach a conclusion on whether action is needed to address the risks that these assets may present.

The Basel Committee will publish the following before the end of the year:

• an updated 2018 list of global systemically important banks, along with the high-level indicator values of all the banks that are within the G-SIB assessment exercise;
• final revisions to the market risk framework (towards the end of the year);
• a consultation paper (in October 2018) on whether the exposure measure should be revised to alleviate its impact on client clearing, including presenting options for revising this; and
• the revised Principles on Stress Testing (in October 2018).

The Basel Committee also published responses to Frequently Asked Questions on the treatment of settled-to-market derivatives under the Liquidity Coverage Ratio and Net Stable Funding Ratio.

View the press release.

View the FAQs.

The U.S. Commodity Futures Trading Commission and the Monetary Authority of Singapore today signed a cooperation arrangement on FinTech innovation, which is to be supported by the agencies' respective FinTech initiatives, LabCFTC and the MAS Financial Technology & Innovation Group. The arrangement will facilitate inter-agency cooperation on FinTech innovation and referrals for innovators that wish to enter the other regulator's market. In addition, it will provide an information sharing framework between the agencies focused on FinTech market trends and developments, innovations and best practices within their respective jurisdictions. The arrangement also calls for joint events, proofs of concept, trials and innovation competitions where permitted, along with periodic meetings to discuss FinTech issues of common interest.

CFTC Chairman J. Christopher Giancarlo in a statement said that he believes this collaboration with the MAS will "enhance global awareness of the critical role of regulators in 21st century digital markets," while Ravi Menon, Managing Director of the MAS, said that he hopes the arrangement will "create more opportunities for firms in both jurisdictions, especially in developing innovative business models for the derivatives market."

The arrangement follows a similar agreement reached by the CFTC and the U.K. Financial Conduct Authority this past February, and reflects the global nature of FinTech markets and the importance of cross-border collaboration between regulators.

View the cooperation agreement.

View the CFTC/FCA agreement.

The Joint Committee of the European Supervisory Authorities has published a joint report on automation in financial advice. The Report follows the ESA's 2015 joint discussion paper and follow-up report in 2016. The Report provides a summary of recent sectoral work by the ESAs in this area and the main findings of a survey with national regulators on the evolution of automation in financial advice in the securities, banking and insurance sectors. The ESAs observed that automated services are more often offered through partnerships between established financial intermediaries and FinTech firms than by FinTech firms alone. The ESAs also found that automation in financial advice has grown slowly and that the number of firms and customers involved is still limited. As a result, the ESAs do not consider that any of the previously identified risks have materialized and therefore that further action is unnecessary at this stage. The ESAs will conduct a new monitoring exercise if and when market developments and risks merit the work.

View the report.

12 international financial regulators and related organizations have announced the launch of the Global Financial Innovation Network. The announcement, which was accompanied by a consultation paper on the role and objectives of the GFIN, serves as part two of a whitepaper published earlier this year by the U.K. Financial Conduct Authority on the possibility of forming a "global sandbox." The GFIN, as proposed, would consist of three components: (i) information sharing and collaboration through a network of regulators; (ii) joint policy work and regulatory trials; and (iii) cross-border firm trials.

The GFIN hopes to build upon existing information sharing agreements to allow information sharing to take place on a larger and quicker scale, which would allow regulators to fill information gaps related to innovation, technological trends and emerging issues. This would help FinTech firms navigate international regulations by providing a comprehensive forum through which to interact with multiple regulators. In addition, the GFIN aims to provide a space to encourage joint policy work and address areas of divergence between financial services regulators, particularly with respect to emerging technologies and legacy business models and regulatory frameworks. As envisioned, the GFIN would also facilitate cross-border trials of emerging technologies across global jurisdictions.

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The U.S. Office of the Comptroller of the Currency announced that it would begin accepting national bank charter applications from non-depository FinTech companies that seek to engage in the business of banking.  In connection with the announcement, the OCC released a policy statement that outlines the OCC’s chartering authority with respect to non-depository FinTech companies, the OCC’s stated support for reasonable innovation, and the chartering standards and supervisory expectations applicable to such institutions.

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The U.S. Department of the Treasury released its report on Nonbank Financials, Fintech, and Innovation.  The FinTech report is the fourth in a series mandated by U.S. President Donald Trump’s Executive Order 13772 on Core Principles for Regulating the United States Financial System.

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The U.K. Payment Systems Regulator has published a Report setting out its understanding of the Contactless Mobile Payments sector, following information-gathering during 2016 and 2017. CMPs are in-store payments made by consumers, using apps installed on their mobile devices, usually using Near Field Technology for communication between the mobile device and the retailer's point-of-sale terminal and with payment security enabled via a "tokenization" process.

The PSR conducted two calls for information in 2016 and 2017, to increase its understanding of:

• whether the way CMPs operate and the way they are being offered in the U.K. potentially affects competition, innovation and the interests of people and organizations that use payment systems (and, if so, how); and
• whether there were any restrictions affecting the provision of tokenization services.

The Report explains how CMPs work from a functional and technical perspective, outlines the main participants and their respective roles, summarizes the PSR's consideration of particular issues and proposes next steps.

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The Financial Conduct Authority has launched a consultation on new rules for loan-based crowdfunding platforms, also known as peer-to-peer lending platforms. The FCA implemented rules regulating FCA-authorized firms operating investment-based and loan-based crowdfunding platforms on April 1, 2014. Investment-based crowdfunding is governed by the Markets in Financial Instruments package and the Alternative Investment Fund Managers Directive, as transposed into U.K. law. The regime for P2P lending is a national one and is less detailed and prescriptive.

The FCA began a post-implementation review of the crowdfunding sector and the applicable regimes in 2016. In the post-implementation review, the FCA identified that harm may be caused to investors as a result of poor business practices and due to the business models that some platforms have adopted. The consultation paper summarizes the FCA's findings from that review and sets out the FCA's proposals to change certain rules and guidance.

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The G20 Finance Ministers & Central Bank Governors have issued a communiqué following their meeting in Buenos Aires on July 21 - 22, 2018. Among other things, the communiqué requests that the Financial Action Task Force clarify, by October 2018, how its global anti-money laundering and counter-terrorist financing standards apply to crypto assets.

The FATF's global standards (also known as the 40 Recommendations) promote effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related threats to the integrity of the international financial system. However, the FATF standards do not refer explicitly to crypto assets or the associated service providers and intermediaries, which creates uncertainty as to the scope of AML/CTF obligations that may apply to them.

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