Archive: January 2019

1
Australian Buy Now Pay Later businesses discuss the utility of Open Banking Regime
2
EU supervisors call for EU-wide policy response to crypto-assets
3
Empire “Blockchain” Building
4
EU supervisors scrutinise FinTech sandboxes and innovation hubs
5
Singapore and London: FinTech Regulation Report
6
Cryptoassets: Taxation of Individuals in the UK
7
Regulating Stablecoins: Certain Stablecoins are Now Subject to the Texas Money Services Act
8
UK FCA Probes Crypto Businesses

Australian Buy Now Pay Later businesses discuss the utility of Open Banking Regime

Jim Bulling, Felix Charlesworth, Edwin Tan

On 22 January 2018, two of the largest ‘buy now, pay later’ businesses in Australia, Afterpay and Zip.co, appeared at a hearing before the Senate’s Economic References Committee.

During the Senate hearing, both Zip.co and Afterpay presented how their respective business models operate and responded to questions about how the ‘buy now, pay later’ industry should be regulated. As previously mentioned, ‘buy now, pay later’ businesses are not currently classified as ‘credit providers’ under the National Credit Code (Code) and, as such, are not subject to the responsible lending obligations under the Code.

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EU supervisors call for EU-wide policy response to crypto-assets

By Giovanni Campi and Martina Topercerova

The European Securities and Markets Authority (ESMA) and the European Banking Authority (EBA) published two complementary assessments of the regulatory coverage of crypto-assets under existing EU legislation and also set out their advice to the European Commission on potential policy initiatives in the future.

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Empire “Blockchain” Building

Authors: Cameron Abbott and Sara Zokaei Fard

The New York City Economic Development Corporation (NYCEDC) is looking at 2019 with fresh eyes. Although digital coin prices plummeted in 2018, some by as much as 90%, NYCEDC has announced that it will open a blockchain centre in Manhattan. The blockchain centre is being developed by NYCEDC in partnership with blockchain industry leaders Future\Perfect Ventures and the Global Blockchain Business Council. 

It is reported that the blockchain centre will be a resource for industry professionals as well as those interested in learning about the technology. It will create a peer community that will provide business support, mentorship as well as public education to assist people to understand how blockchain can impact daily life. The block chain centre will also be utilised to convene bodies including from industry and government to further dialogue on a regulatory environment that supports both consumers and innovation.

Industry leaders have described it as “a nascent technology” and a “burgeoning innovation sector”. The question now becomes, should we invest in bitcoin, or the blockchain centre itself as Microsoft and IBM have done!

EU supervisors scrutinise FinTech sandboxes and innovation hubs

By Giovanni Campi and Martina Topercerova

The European Supervisory Authorities (ESAs), including the European Securities and Markets Authority (ESMA) and the European Banking Authority (EBA), have published a report setting out a comparative analysis and best practices in the design and operation of sandboxes and innovation hubs (“innovation facilitators”) established in the European Economic Area. The report was requested by the European Commission in its FinTech Action plan, as part of its efforts to enable innovative businesses to reach EU-wide scale.

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Singapore and London: FinTech Regulation Report

By Jonathan Lawrence

A report has been published summarising the findings from research by ICAEW (The Institute of Chartered Accountants in England and Wales) and ISCA (Institute of Singapore Chartered Accountants) into FinTech in London and Singapore. The two cities show the importance of tailoring detailed measures to reflect local differences. Singapore, for example, puts stronger emphasis on collaboration between start-ups and the established sector, and acts as a gateway to new markets across Southeast Asia. By contrast, in London, there is more of a push for start-ups to disrupt the incumbents in financial services and more focus on the challenges of scaling up FinTech businesses.

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Cryptoassets: Taxation of Individuals in the UK

By Jonathan Lawrence

On 19 December 2018, the UK tax authority, HM Revenue and Customs (“HMRC”), published a policy paper on the taxation of cryptoassets. The guidance is limited to HMRC’s view in relation to individuals holding cryptoassets and does not extend to tokens or assets held by businesses. The guidance confirms that HMRC does not consider cryptoassets to be currency or money for tax purposes and separates crypto assets into three categories of “tokens”: exchange tokens, utility tokens and security tokens. The guidance focuses on the taxation of “exchange tokens,” a term encompassing assets such as Bitcoin.

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Regulating Stablecoins: Certain Stablecoins are Now Subject to the Texas Money Services Act

By Daniel S. Cohen

On January 2, the Texas Department of Banking (“DoB”) updated Supervisory Memorandum – 1037 (“Guidance”) which provides guidance regarding the application of the Texas Money Services Act (the “Act”) to virtual currencies.  First issued on April 3, 2014, the Guidance divides virtual currency into two categories: centralized and decentralized.

Centralized virtual currencies are virtual currencies “created and issued by a specified source” that “rely on an entity with some form of authority or control over the currency”. Decentralized virtual currencies, on the other hand, are virtual currencies that do not have an administrator or a central repository. 

Stablecoins are considered decentralized virtual currencies, provided they do not have an administrator or central repository.  According to the Guidance, whether the Act applies to centralized virtual currencies requires a case-by-case determination.  As for decentralized virtual currencies, the Guidance states that the Act only applies when sovereign currency is involved, and only in certain cases, because decentralized virtual currencies do not constitute money or monetary value. 

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UK FCA Probes Crypto Businesses

By Jonathan Lawrence

The Financial Conduct Authority (FCA), the UK financial regulator, confirmed to the Financial Times on 30 December 2018 that it was investigating 18 businesses involved in the sale of cryptocurrencies. The regulator has also issued alerts and warnings about dozens of companies suspected of cryptocurrency investment fraud. Currently, the transfer, purchase and sale of cryptocurrencies are not regulated in the UK. However, companies that sell regulated investments with an underlying cryptocurrency element may need FCA authorisation to do so depending on their activities.

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