FinTech Monthly Bulletin: December 2020

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1. General

1.1 The Central Bank of the UAE (CBUAE) has announced the launch of a new FinTech Office (Office). The Office will play a central role in developing a mature FinTech ecosystem in the UAE through attracting local and international talent and FinTech companies to the region. (25 November 2020) 

1.2 The CEO of the UK's Financial Conduct Authority (FCA), Nikhil Rathi, gave an address to the City Regulators about the challenges and priorities for the FCA going forward in light of the COVID-19 pandemic and the end of the Brexit transition period. In his speech, Mr Rathi warned that despite the immediate challenges faced by the financial services industry, it is important that the sector does not to take its eye off the ball in relation to the long running issues that are reshaping the sector, including the growth of big data, machine learning and artificial intelligence, which pose new ethical and regulatory questions but also great potential for innovation.  However, Mr Rathi warned that even these issues are potentially dwarfed in terms of impact by climate change.  (12 November 2020)

1.3 The European Union Agency for Cybersecurity (ENISA) has published its Guidelines on Securing the Internet of Things (IoT) Supply Chain. The Guidelines report on the processes of the supply chain used to develop IoT products. The report covers the entire lifespan of IoT product development, i.e. hardware, software and services, and provides security measures for each step. (9 November 2020)

2. Artificial Intelligence and Automation

2.1 At the World Internet Conference - Internet Development Forum, Liu Liehong, China's Vice-Minister of Industry and Information Technology, stated that China is at the forefront of developing Artificial Intelligence (AI) to tackle global problems such as the COVID-19 pandemic. In its 14th Five-Year Plan (2021-25) proposals, China has highlighted the role of frontier technologies like AI, 5G, supercomputing and quantum computing. (25 November 2020) 

2.2 See also paragraph 1.2.

3. Crypto-assets

3.1 The Saudi Arabian Central Bank (SAMA) and CBUAE have released a joint report on the Aber project. The Aber project is an initiative launched by the two central banks in 2019. It was established to explore the viability of a single dual-issued digital currency as a means of enabling domestic and cross-border settlements between the two countries. The report confirms the technical viability of the project. However, it also identifies a number of areas for further research, including the need to consider the impact of such a currency on the monetary policy of each country. Nevertheless, the report states that both SAMA and CBUAE are pleased by the promising results of the project to-date. (29 November 2020) 

3.2 "Double 12", a shopping festival in Suzhou, China, has held a second lottery trial of the digital Yuan, the Chinese central bank's digital currency. Following the trial carried out earlier in October 2020 in Shenzhen, citizens will be invited to apply for a share of the 10 million units of the digital yuan. The trial will test further technological features not applied in the earlier trial to improve both the efficiency and the ease of transfer of the currency using a digital wallet. This is in a bid to encourage and educate people on the use of the digital yuan. (23 November 2020) 

3.3 South Africa's Financial Sector Conduct Authority (FSCA) has circulated a draft Declaration of crypto-assets as a financial product under the Financial Advisory and Intermediary Services (FAIS) Act. The FSCA stated that any person furnishing advice or rendering intermediary services in relation to crypto-assets must be authorised under the FAIS Act as a financial services provider. They must also comply with the requirements of the FAIS Act. Any comments from interested parties on the draft Declaration can be made until 28 January 2021. Further information on the draft Declaration can be found in the FSCA's press release here. (21 November 2020) 

3.4 Thailand's Securities and Exchange Commission (SEC) has reported changes to its net capital requirement rules for brokerages and securities firms, including those in the digital assets sector. Through these changes, the Thai SEC hopes to raise liquidity in the market and support the growth of new businesses, which include cryptocurrency exchanges. Further information can be found here. (18 November 2020) 

3.5 Russia's Ministry of Finance has announced new amendments to the draft bill on crypto-assets. These aim to soften the requirements for taxpayers to disclose their cryptocurrency holdings in a bid to encourage crypto entrepreneurs to stay in Russia. (12 November 2020) 

3.6 See also paragraphs 4.5, 10.1 and 10.4.

4. Cybersecurity

4.1 ENISA has held an online workshop aimed at opening up discussions around tackling cybersecurity challenges arising due to COIVD-19  amongst small and medium-sized enterprises (SMEs). ENISA used this opportunity to encourage participants to provide feedback on its Report on Cybersecurity for SMEs and invite any recommendations. The report is due to be published in the coming months. (23 November 2020)

4.2 ENISA has hosted "ENISA Hackfest 2020", a Capture the Flag (CTF) event inviting the top cybersecurity minds from EU and EFTA countries to connect and train the teams participating in the 2021 European Cyber Security Challenge. The event involved over 250 participants from 17 EU and EFTA countries challenging individuals to solve cybersecurity problems in areas such as web security, mobile security, crypto, reverse engineering and forensics. (19 November 2020)

4.3 ENISA and the Danish Health Data Authority have collaborated to host the third and final part of the 'eHealth Security Conference 2020: Working Together Towards Secure eHeath'. The third part of the conference focussed on the healthcare industry's cybersecurity incident response to events fuelled by  the COVID-19 pandemic. The two main talking points were:

• the contribution from both the private and public sectors, towards the system at EU Member State level; and
• whether the information exchange across communities has been effective at advancing the preparedness of the healthcare industry to cyber incidents across Europe. (18 November 2020)

4.4 The Monetary Authority of Singapore's (MAS) Cyber Security Advisory Panel has stressed  the need for financial institutions to review their security controls. The announcement is in response to the elevated technology-related risk caused by the increase in remote working, and the challenges this has placed on safe management measures, as a result of the COVID-19 pandemic.  (10 November 2020)

4.5 The EU Commission has published its proposed regulation intended to improve financial services firms' operational resilience and ability to respond to cyberattacks. The Regulation is part of the Commission's wider "Digital Finance Package" which also includes: 

• a proposed regulation on markets in crypto-assets; 
• a pilot regime on distributed ledger technology market infrastructure; and 
• a proposed Directive to clarify or amend existing EU financial services legislation such as UCITS, MiFID2, and AIFMD. 

The Commission has stated that the package is intended to boost the EU's competitiveness and innovation in the financial sector. Please read our Insights article on "Digital operational resilience for the financial sector" for more information. (10 November 2020) 

4.6 The Dubai Financial Services Authority (DFSA) has held the "DFSA Cyber Risk Forum - Remaining resilient in the era of transformation and disruption" event on 17 November. This was to raise awareness of the current cyber risks as well as to promote cybersecurity maturity amongst companies operating in or from the Dubai International Financial Centre (DIFC). (9 November 2020) 

4.7 The European Union has imposed new sanctions on cyberattackers for hacking the German Parliament in 2015. Under the sanctions regime, restrictive measures can include a ban on listed persons traveling to the EU and an asset freeze. In addition, EU persons and entities are forbidden from making funds available to those listed. For more information, please read our Insights article, "The European fight against cybercriminals: 'cyber sanctions'" here. (6 November 2020) 

4.8 The Hong Kong Monetary Authority (HKMA) has announced the launch of an upgraded Cybersecurity Fortification Initiative (CFI) 2.0 in response to the fast-changing cybersecurity landscape. Originally aimed at raising the cyber resilience of Hong Kong's banking sector, HKMA arranged an industry consultation, the results of which revealed that the banking industry needs to enhance its procedures to better reflect the latest technology trends. The CFI 2.0 will come into effect 1 January 2021 and be introduced in a phased approach. (3 November 2020)

4.9 See also paragraph 1.3.

5. Data

5.1 MAS has launched a $35 Million Productivity Solutions Grant to help small financial institutions adopt digital solutions for data reporting to MAS. This is part of MAS's initiative to support smaller financial institutions in their efforts to improve productivity. (9 November 2020)

5.2 See also paragraphs 1.2, 10.3 and 10.4.

6. Distributed Ledger Technology, Blockchain and Smart Contracts

6.1 The Australian Border Force (ABF), the country's customs and border protection agency, has launched a new initiative to trial 'paperless' trade using blockchain technology. This is in a bid to simplify cross-border trade with Singapore and make it easier for businesses to digitally exchange trade documentation. Businesses and regulators are encouraged to provide feedback on the process with a follow up report on the findings set to be published in Q1 2021. (25 November 2020)

7. Investments in FinTech

7.1 MAS has announced that 40 innovative solutions have been shortlisted for the MAS FinTech Awards at the Singapore FinTech Festival x Singapore Week of Innovation and TeCHnology (SFF x SWITCH). This year's MAS FinTech Awards have placed an emphasis on "Building Resilience, Seizing Opportunities, Emerging Stronger". The 40 solutions are all being recognised due to their focus on helping the financial sector respond better to two key global challenges:

• the new operating environment precipitated by COVID-19; and
• sustainability and climate change.

Within the same event, MAS has also selected 20 finalists for the 2020 Global FinTech Hackcelerator to pitch their solutions, as above, based around the theme of tackling the challenges created by COVID-19 and climate change.(25 November 2020)

7.2 The Bank for International Settlements Innovation Hub (BISIH) centre in Hong Kong and the HKMA have announced their "TechChallenge" winners. The winners had the opportunity to demonstrate their technology solutions during the Hong Kong FinTech Week. The solutions tackled issues such as: connecting TradeTech platforms; improving trade finance inclusion for SMEs; and developing TradeTech infrastructure for emerging markets. (2 November 2020) 

7.3 Abu Dhabi Global Market (ADGM) has introduced its new Digital Lab in collaboration with the Central Bank of the UAE. The Digital Lab is a virtual environment designed to bring together like minded start-ups, financial institutions and regulators who are eager to work together to drive digital transformation in a trusted and secure environment. The lab has two main features: 

• the digital marketplace; and
• the sandbox environment.

The digital marketplace is an online platform where start-ups and innovators can showcase their solutions. The sandbox (or RegLab 2.0) leverages smart digital toolkits and synthetic data to simulate core banking operating systems, allowing users to "plug and play" and test their prototypes with multiple participants. More information can be found here. (1 November 2020)

7.5 See also paragraphs 1.1 and 10.4. 

8. Payments and Open Banking

8.1 MAS has announced that Non-Bank Financial Institutions (NFI) are to have access to two important e-payment platforms used within the Singapore banking system's retail payments infrastructure. These are Fast and Secure Transfers (FAST) and PayNow. Firms will be able to access these systems from February 2021. This will enable users of NFI e-wallets to make real-time funds transfers between bank accounts and e-wallets as well as across different e-wallets. (30 November 2020) 

8.2 The Bank of England's Chief Economist and member of the Monetary Policy Committee, Andy Haldane, has delivered a speech at the CityUK 10th Anniversary Conference titled "Seizing the Opportunities from Digital Finance". Focussing on the "three Rs" - Recovery, Rebalancing and Revitalisation - the speech covered:

• the evolving payments landscape;
• the evolving lending landscape; and
• building digital foundations. (18 November 2020)

8.3 Banque Du Liban Governor Riad Salameh, Lebanon's chief central banker, has announced that Lebanon is preparing a central bank digital currency rollout for 2021. The aim is to progress toward a "cashless system" that enables more seamless cash movement locally and abroad, and to restore confidence in Lebanon's troubled banking sector. (10 November 2020)

8.4 The Open Banking Implementation Entity (OBIE) has launched consultations on Variable Recurring Payments (VRPs) and sweeping. This represents the next stage in the development of open banking in the UK. VRPs allow customers to safely connect authorised payment providers to their bank account so that they can make payments on the customer's behalf, within agreed parameters that offer more control and transparency than existing alternatives. Sweeping is the automated movement of funds for a customer between two accounts in their name, usually to help the customer avoid charges or benefit from better interest rates. (9 November 2020)

8.5 The FCA has reported that there are to be changes to open banking identification requirements post Brexit. The proposed changes will allow UK-based third-party providers (TPPs) to use an alternative to eIDAS certificates to access customer account information from account providers or to initiate payments. As a result, the following will need to be complied with:

• UK-based TPPs will need to obtain a new certificate to be able to continue to provide open banking services in the UK, after Brexit; and

• Account providers (e.g. banks) will likely need to make technical changes to their systems to enable TPPs to continue accessing customer account information, by accepting an alternative certificate and informing TPPs as soon as possible which certificate(s) they will accept. (3 November 2020)

8.6 The CBUAE has announced the new Stored Value Facilities Regulation (the Regulation), which amends the Regulatory Framework for Stored Values and Electronic Payment Systems issued on 13 December 2016 (the Framework). This is in light of the recent technological advances in stored value products and services. The Regulation covers the licensing, supervisory and enforcement requirements for stored value facility providers operating in the UAE (excluding the DIFC and ADGM), as well as non-UAE entities which promote stored value facilities in the UAE on a cross-border basis. Unlike the Framework, the Regulation extends the meaning of stored value facilities to include those which hold cryptoassets. The Regulation came into effect on 15 November 2020 with a one-year transition period for companies licensed under the Framework. (3 November 2020)  

8.7 The OBIE has submitted a response to the FCA's Consultation regarding the revocation of eIDAS certificates, which was shared on 4 September 2020, and has encouraged other members of the open banking ecosystem to do the same. The Consultation period is open until 31 December 2020. (3 November 2020)

8.8 MAS has introduced the Payment Services (Amendment) Bill (the Bill) for First Reading in Parliament. The proposed amendments to the Payment Services Act 2019 aim to reflect the international standards adopted by the Financial Action Task Force in June 2019. They address, among others, the money laundering and terrorist financing risks posed by virtual asset service providers that are not already regulated as financial institutions. For more information on the key amendments in the Bill, please click here. (2 November 2020) 

9. RegTech

9.1 The Financial Stability Board (FSB) has hosted a virtual workshop to showcase its work on the use of supervisory (SupTech) and regulatory (RegTech) technology by authorities and regulated institutions. The workshop discussed market developments and financial stability implications raised in the FSB's recent report on this topic. (12 November 2020) 

9.2 The UK Information Commissioner's Office (ICO) has announced two innovative tools arising out of its regulatory sandbox to help companies tackle financial crime. The first solution aims to improve know-your-customer processes that financial institutions use, for example, when a customer wants to open a bank account, by identifying and mitigating bias present in current biometric identity verification technology. The second tool monitors the flow of funds in the financial system via an analytics platform. (5 November 2020)

9.3 See also paragraph 10.4.

10. Other

10.1 FinTech Abu Dhabi 2020 - co-hosted by ADGM and the Central Bank of the UAE drew to a close on 26 November. The 3-day digital event hosted a range of immersive sessions, bringing together over 25,000 participants from the FinTech community across the globe. Content can be viewed on-demand here, which includes Ravi Menon's (Managing Director of MAS) discussion on "Digital Finance as a Means to Advance Inclusion and Sustainability" a transcript of which can be found here. (25 November 2020) 

10.2 The FSB has hosted a virtual workshop to showcase its work on the financial stability implications of "BigTech" firms in finance, specifically in emerging market and developing economies, based on its report on this topic. (12 November 2020)

10.3 The UK's Information Commissioner, Elizabeth Denham,   emphasised during her speech at the Open Data Institute's 2020 virtual summit that trust is imperative if the types of innovation being discussed during the conference are going to achieve their full potential. The full speech can be found here. (12 November 2020)

10.4 HKMA has organised the Hong Kong FinTech Week 2020 with the help of InvestHK. HKMA announced a range of initiatives to further foster the FinTech ecosystem in Hong Kong and support SMEs. Some of the key topics discussed during the conference were: 

• Using data to facilitate SME financing;  
• Facilitating the digitalisation of trade finance;  
• Research on Central Bank Digital Currency; and  
• Promoting RegTech adoption. (2 November 2020)

About Simmons & Simmons’ FinTech team

The FinTech Monthly Bulletin is prepared by the FinTech team of Simmons & Simmons.

Since its emergence into the mainstream, the FinTech sector has captured the interest and imagination of entrepreneurs, investors, governments and regulators, not to mention financial institutions and asset managers. We understand the opportunities and challenges that lie at the heart of the FinTech revolution and advise clients navigating the novel legal and regulatory issues that frequently arise.

Our market leading FinTech team combines specialist expertise across practices and offices with insights resulting from a focus on the TMT, Financial Institutions, and Asset Management and Investment Funds sectors.

Our clients range from early stage start-ups to some of the world’s largest financial institutions and technology providers. We also advise clients partnering with or investing in FinTech firms as well as financial institutions and asset managers developing their own FinTech solutions.

We support clients across a broad range of FinTech matters including crowdfunding, payments, cryptoassets, distributed ledger technology, InsurTech and RegTech, and we are interested in all areas of financial technology innovation.

If you would like to find out more about our FinTech team or require advice on a FinTech matter, please contact one of our lawyers at this link or your usual Simmons & Simmons contact.