Your weekly summary of key regulatory updates in an objective bite-size format, drawing on official news and press releases from 400+ financial services regulators, central banks as well as global and regional standard setters,
At a glance - Highlights by topic
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FATF suspends membership of Russian federation over war of aggression against Ukraine Hong Kong SFC consults on regulation of virtual asset trading platforms CSA publishes notice with enhanced expectations for Canadian crypto trading platforms U.S. Federal Bank Regulatory Agencies issue joint statement on liquidity risks of crypto-asset-related entities Vanuata FSC announces plans for drafting of digital asset legislation FSB details actions under priority areas for achieving targets under the G20 payments roadmap MAS and RBI launch new payments linkage New BIS paper analysis regulatory frameworks governing banking executives Canadian Securities Administrators call on market participants to prepare for 2024 CDOR cessation
AML & CFT
FATF suspends membership of Russian federation over war of aggression against Ukraine
In response to the Russian Federation’s war of aggression against the Ukraine, the FATF has decided to suspend its membership. In support of its decision the FATF noted: “The Russian Federation’s actions unacceptably run counter to the FATF core principles aiming to promote security, safety, and the integrity of the global financial system. They also represent a gross violation of the commitment to international cooperation and mutual respect upon which FATF Members have agreed to implement and support the FATF Standards”. Despite the suspension, Russia will remain accountable for meeting FATF standards.
Fintech & ecosystem innovation
Hong Kong SFC consults on regulation of virtual asset trading platforms
The Hong Kong Securities and Futures Commission (SFC) has launched a consultation on the proposed requirements for operators of virtual asset trading platforms. The consultation follows the amendment of Hong Kong’s AML/CFT bill in late 2022 that introduced the requirement for all centralized virtual asset trading platforms carrying on their business in Hong Kong or actively marketing their services to Hong Kong investors to be licensed and regulated by the SFC. To that end, the consultation is detailing the proposed regulatory requirements for these platforms. Besides the specific AML/CFT requirements these encompass inter alia expectations in relation to fitness and properness, financial soundness, operations as well as dealing with clients and the custody of client assets. As part of the consultation, the SFC is also seeking views on its proposal to allow all types of investors, including retail investors, access to virtual asset trading platforms – subject to platforms having adequate customer protection safeguards in place. The consultation is open until end of March. The new licensing regime will subsequently come into effect on June 1, 2023.
CSA publishes notice with enhanced expectations for Canadian crypto trading platforms
The Canadian Securities Administrators (CSA) has published a notice with enhanced expectations of crypto asset trading platforms (CTPs) operating in Canada. The added expectations build on the previously introduced pre-registration undertaking and include inter alia enhanced expectations regarding the custody and segregation of crypto assets held on behalf of Canadian clients, a prohibition on offering margin, credit, or other forms of leverage to any Canadian client, as well as the requirement to seek prior written consent of the CSA when intending to permit clients to purchase or deposit stablecoins or proprietary tokens. CTP unwilling or unable to comply with the new requirements are expected to off-board existing Canadian users and impose restrictions to prevent Canadian users from accessing its products or services.
U.S. Federal Bank Regulatory Agencies issue joint statement on liquidity risks of crypto-asset-related entities
The U.S. Federal Bank Regulatory Agencies have issued a new joint statement to address the liquidity risks of crypto-asset related entities. The statement highlights the key liquidity risks associated with certain sources of funding from crypto-asset related entities and outlines effective practices for their management. Specifically, the statement identifies deposits placed by a crypto-asset-related entity that are for the benefit of the crypto-asset-related entity’s customers (end customers) and deposits that constitute stablecoin-related reserves as particular sources of liquidity risks. In order to manage the risks, Agencies recommend among other things to form an understanding of the direct and indirect drivers of potential behaviour of deposits from these entities and their exposure to volatility, to assess potential concentration or interconnectedness across deposits from cryptoassets-related entities and to incorporate the identified liquidity risks or funding volatility into contingency funding planning.
The Vanuatu Financial Services Commission (FSC) will in the near future commence the formulation of dedicated digital asset legislation it announced in a new statement. The new regulatory framework will cover digital asset service providers including digital asset exchanges and several other areas including issuance of NFTs, stablecoins, DeFi. The framework will also provide for a digital asset sandbox.
Payments & currency
FSB details actions under priority areas for achieving targets under the G20 payments roadmap
The Financial Stability Board has released a new report detailing next steps under the G20 cross-border payments roadmap. The report further specifies the planned actions under the three priority areas that were previously communicated in late 2022, namely:
Payment system interoperability and extension: Key work blocks under this priority will include improving direct access to payment systems, extending and aligning payment system operating hours as well as enhancing interlinkages for cross-border payments. Legal, regulatory and supervisory frameworks: Work will focus on the promotion of an efficient legal, regulatory and supervisory environment for cross-border payments including the alignment of regulatory, supervisory and oversight frameworks as well as the consistent application of AML/CFT rules Cross-border data exchange and message standards: This priority pursues the objective of facilitating cross-border data exchange and increase the use of standardize messaging formats, achieved among other things through a harmonized adoption of ISO 20022 for message formats and the harmonization of API protocols for data exchange
MAS and RBI launch new payments linkage
The Monetary Authority of Singapore (MAS) and the Reserve Bank of India (RBI) have launched a new linkage between Singapore's PayNow and India's Unified Payments Interface (UPI) to enable customers of participating financial institutions in Singapore and India to send and receive funds between bank accounts or e-wallets in real-time. The new service is made available to customers of participating Singaporean and Indian banks and is intended to provide a safe, simple, and cost-effective way for low-cost cross border remittances. It is the world’s first real-time payment systems linkage to use a scalable cloud-based infrastructure which can accommodate future increases in the volume of remittance traffic.
Other transversal themes
New BIS paper analysis regulatory frameworks governing banking executives
The Bank for International Settlements has released a new paper that reviews the evolution of regulatory frameworks that govern the accountability of banking executives and outlines their implementation challenges. It proposes a multi-faceted approach, called the accountability stack, which includes layers of regulatory and supervisory instruments to address misconduct. This stack is reliant on robust supervision and enforcement, and requires institutional will to act.
Canadian Securities Administrators call on market participants to prepare for 2024 CDOR cessation
The Canadian Securities Administrators (CSA) has issued a new staff notice to encourage market participants to prepare for the upcoming cessation of the Canadian Dollar Offered Rate (CDOR). Among other things, the notice provides information about developments and transition issues related to the cessation, including the expected related cessation of the issuance of Bankers’ Acceptances.
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