FinTech and Blockchain Law Watch – Page 39 – At the Crossroads of Law, Innovation and Commerce

Crowdfunding Regulation Part 1: Guidance For Public Companies

Jul 28 2017

By Jim Bulling, Michelle Chasser and Daniel Knight

While the Australian government considers including private companies in the crowd-sourced funding (CSF) regime, the Australian Securities and Investments Commission (ASIC) has published Consultation Paper 288 Crowd-sourced funding: Guide for public companies. CP 288 includes a draft Regulatory Guide outlining ASIC’s proposed guidance for public companies which will raise funds through the CSF regime from 28 September 2017, including an explanation of the new Corporations Amendment (Crowd-sourced Funding) Regulations 2017.

Australia stepping closer to open banking

Jul 26 2017

By Jim Bulling and Michelle Chasser

The Australian Treasury has announced an independent review into open banking in Australia. Open banking will require banks to share product and customer data with customers and third parties with the consent of the customer. The Government previously announced that the open banking regime would be introduced in 2018 to help customers seek more suitable products and increase competition.

FCA payment services rule making powers extended

Jul 26 2017

By Jonathan Lawrence

The UK Financial Conduct Authority (FCA) has issued a statement expressing concern that payment institutions and e-money institutions may have used currency converter tools in relation to their currency transfer services in a misleading way. Tools which convert currency at the interbank rate may be used in such a way as to give consumers the misleading impression that the interbank rates shown are available to them, rather than the materially inferior rate that customers are likely to achieve. Consumers may not become fully aware of the inferior rate they are likely to achieve until an advanced stage in the customer journey, commonly after a customer registration process has been undertaken. At that stage, consumers may be unlikely to shop around.

Increased access to the Bank of England’s payment systems

Jul 21 2017

By Jonathan Lawrence

The Bank of England has widened access to the United Kingdom’s interbank payments system to increase competition by FinTech providers. The Bank announced on 19 July that a new generation of non-bank payment service providers (PSPs) will now be eligible to apply for a settlement account in the Bank’s Real-Time Gross Settlement (RTGS) system. The RTGS system has traditionally held the accounts of financial institutions in order to promote inter-bank settlement. Holding their own settlement account at the Bank will enable these non-bank PSPs to apply, for the first time, for direct access to the UK’s sterling payment systems that settle in sterling central bank money, including Faster Payments, Bacs, CHAPS, LINK, Visa, and, once live, the new digital cheque imaging system.

Proposed APRA powers over non-bank lenders

Jul 20 2017

By Michelle Chasser and Daniel Knight

The Australian Treasury has released for consultation, draft legislation which would give the Australian Prudential Regulatory Authority (APRA) prudential regulatory powers in relation to non-bank lenders including marketplace lenders. Non-bank lenders are corporations:

whose business activities in Australia include the provision of finance such as:
- the lending of money;
- carrying out activities, whether directly or indirectly (such as through a trust), which result in the funding or originating of loans;
- letting or hire-purchase of goods; or
- acquiring debts dues to another person, bills of exchange or promissory notes; and
with more than $50 million in loan principal amounts outstanding or debts due to it resulting from transactions entered into in the course of providing finance.

Bank of England FinTech Accelerator Proofs of Concept

Jul 17 2017

By Jonathan Lawrence and Judith Rinearson

On July 10, 2017, the Bank of England (the “Bank”) published summaries of their third round of Proofs of Concept (“PoC”), completed by its FinTech Accelerator.

The FinTech Accelerator was established in 2016, and works in partnership with firms to understand the new technology they may be working with and how FinTech innovations could be utilised within central banking. These PoC provide valuable understanding in respect of FinTech trends and support to its continued development by providing a platform for those firms to demonstrate their solutions for real issues and knowledge from BoE experts.

Blockchain for the humanitarian sector

Jul 17 2017

By Jonathan Lawrence

A network of global charities has begun using blockchain to provide costs savings and transparency to donations. Organisations including Oxfam, Save the Children, Mercy Corps and Christian Aid are three of the 42 members of the Start Network, which trialled the use of blockchain in humanitarian projects last year. The group will work on the project with start-up fund management platform Disberse.

Disberse uses blockchain, which records all transactions in a distributed digital ledger, to try to ensure that less money is lost on exchange rate fluctuations and traditional banking fees. It will also help charities to fight fraud, by tracking all transactions. The ultimate aim would be to track every dollar in aid, from original donor to each individual assisted.

More banks join SWIFT blockchain Proof of Concept

Jul 13 2017

By Jonathan Lawrence

22 additional global banks have joined SWIFT’s blockchain proof of concept (PoC), designed to validate whether the technology can help banks reconcile their international nostro accounts in real time. A nostro account is an account that a bank holds in a foreign currency in another bank. These banks will test and validate the PoC’s blockchain application, currently under development by SWIFT and a group of six founding banks that launched the PoC in April 2017. Working independently of the founding banks, the 22 institutions will act as a validation group to further test the application and evaluate how the technology scales and performs.

New York moves money transmitters to NMLS

Jul 13 2017

By Jeremy McLaughlin and Judith Rinearson

As of July 1, 2017, the New York Department of Financial Services (“DFS”) is using the Nationwide Multistate Licensing System and Registry (“NMLS”) to manage license applications and conduct ongoing regulation of nondepository financial institutions, including money transmitters, doing business in New York. The NMLS website is available here.

The decision by DFS should bring some additional ease to an otherwise cumbersome state-by-state money transmitter licensing regime. Applicants applying for a license in the NMLS system need only fill out a single set of applications for all states that participate (although, of course, individual state licensing requirements still differ). Money transmitters already licensed in New York will be able to transition their licenses to the NMLS system. In a June 29, 2017 press release, available here, DFS stated it had sent letters to each licensee providing detailed instructions on how to accomplish the transition.

DFS has lauded the move to NMLS as bringing efficiency to its regulatory oversight responsibilities, including enhanced consumer protection. According to a May 11, 2017 DFS press release, the move to NMLS will “allow DFS to provide better supervision of the money transmitter industry by linking with other states to protect consumers.”

Surging Adoption Levels of FinTech Services

Jul 07 2017

By Cameron Abbott and Ling Zhu

No great surprises arising from the EY FinTech Adoption Index 2017 which has revealed impressive growth in consumer uptake of FinTech products and services, with 33% of 22,000 digitally active consumers using FinTech firms – doubling from 16% in 2015. With less brand loyalty and reduced trust in traditional organisations, consumers are increasingly turning to FinTech firms as better alternatives.

Money transfer and payment services are the most popular FinTech category, with 50% of consumers using these services. This has been driven by the increasing popularity of mobile phone payments and online digital-only banks. Insurance is the second most popular service, with insurance premium comparative services simplifying the process of acquiring insurance.

FinTech has particularly excelled in emerging markets, with an adoption by digitally active consumers across China, India, South Africa, Brazil and Mexico averaging 46%. The growing middle class have embraced FinTech to meet the growing demand for financial services, encouraged by cooperative regulators and policymakers.

EY anticipates that FinTech adoption will increase to 52% globally as consumers become more aware of the products and services on offer.

Read the full report here.