UK – Page 8 – FinTech and Blockchain Law Watch

The Sandbox is getting crowded

Sep 29 2016

In a recent speech delivered at the British Bankers’ Association FinTech Banking Conference, Christopher Woolard, the Director of Strategy and Competition at the UK Financial Conduct Authority spoke about the high level of interest in the FCA’s Regulatory Sandbox for FinTech ventures. The Sandbox aims to create a ‘safe space’ in which FinTech businesses can test innovative products, services, business models and delivery mechanisms in a live environment without immediately incurring all the normal regulatory consequences of engaging in the activity.

Of 69 applications to join the Sandbox, the FCA has accepted 24 to develop towards testing. The FCA’s team has been expanded to meet demand. 40 of the unsuccessful first time applicants will be offered assistance via Project Innovate or other FCA staff, in some cases to prepare for the next cohort of the Sandbox.

FinTech hub ecosystems

Sep 28 2016

By Jonathan Lawrence

A recent EY study looks at how the UK FinTech ecosystem compares to that of California, New York, Germany, Singapore, Hong Kong and Australia based on their status as FinTech hubs. The report considers four attributes in each region:

Talent (availability and pipeline)
Capital (seed, growth and listed)
Policy (regulatory regimes, government programmes and taxation policy)
Demand (consumer, corporate and financial institution)

The analysis was commissioned by the UK Government to inform policy and support the sector. It also includes case studies on Israel and China.

The study gives extremely interesting comparative data across the regions and provides recommendations for the UK Government based on the experience in other countries.

Further developments on Britcoin

Sep 15 2016

By Jonathan Lawrence

Victoria Cleland, Director for Banknotes and Chief Cashier of the Bank of England, gave a speech on FinTech issues on 8 September (see the speech here).

Of particular interest were Ms Cleland’s remarks on the Bank’s long-term research on the wide range of questions posed by the potential of a central bank-issued digital currency (CBDC), including whether a CBDC would be feasible and whether it would benefit the economy and the financial sector, over the medium term. To support its research, the Bank has invited contributions to a set of research questions on the opportunities and challenges that could arise from the introduction of CBDC (see the questions here).

Bank of England Governor remarks on FinTech

Aug 22 2016

By Jonathan Lawrence

In remarks that were rather overlooked in the run-up to the Brexit vote in June, Mark Carney, the Governor of the Bank of England, talked on several FinTech topics. He mentioned five ways the Bank is enabling the FinTech transformation:

Widening access to central bank money to non-bank Payments Service Providers
Being open to providing access to central bank money for new forms of wholesale securities settlement
Exploring the use of Distributed Ledger (DL) technology in the Bank’s core activities, including the operation of Real-time gross settlement systems (RTGS)
Partnering with FinTech companies on projects of direct relevance to the Bank’s mission
Calibrating its regulatory approach to FinTech developments

UK grants FinTech a banking licence – another tier of regulation?

Aug 21 2016

By Jim Bulling and Michelle Chasser

Has the age of the digital bank arrived in the UK? Following the authorisation of Atom Bank last year, 3 additional digital banks have been issued with banking licences by the UK Prudential Regulation Authority (PRA) since May 2016.

These new licensees are the result of the PRA’s focus in recent years on lowering the barriers to entry for new banks and promote competition in the UK. As part of this focus, in 2013, PRA lowered the initial minimum capital requirements for Small Specialist Bank applicants to €1 million or £1 million (whichever is higher), plus a capital planning buffer (CPB). PRA and the Financial Conduct Authority (FCA) also launched a New Bank Start-up Unit in January 2016 to assist applicants with the authorisation process. Read More

A road map for UK FinTech standards

Aug 16 2016

By Jonathan Lawrence

New research has revealed the important role that standards could play in helping to strengthen and speed-up FinTech’s development in the United Kingdom. The research was published by the British Standards Institution (BSI), the national standards body of the UK. BSI produces technical standards on a wide range of products and services, and also supplies certification and standards-related services to businesses. The research was prepared by Finextra and gathered insights from a cross-section of FinTech companies, banks, trade associations, technology vendors.

BSI commissioned the research to investigate where standards could best support UK FinTech and help provide leadership in global standardisation following interest from the industry in 2015. This latest research shows there could be a further opportunity to complement regulation with standards, to promote the UK’s position in FinTech. The analysis found a number of priority areas where standards could help promote the streamlining of the procurement and onboarding processes between banks and FinTechs; integrating FinTechs into the standards and language of the financial services industry and providing consumer assurance and the gaining of trust.

To read the full report, please click here.

FCA Feedback Statement on RegTech

Jul 25 2016

By Jonathan Lawrence

The UK Financial Conduct Authority defines RegTech as “a sub-set of FinTech that focuses on technologies that may facilitate the delivery of regulatory requirements more efficiently and effectively than existing capabilities”. In November 2015, the FCA asked for views on how it should progress and prioritise its RegTech work. It received more than 350 responses from established financial services firms, technology suppliers and FinTech start-ups and the FCA also convened roundtable meetings. The feedback statement was released on 20 July.

The main themes that emerged concerned technology that:

allows more efficient methods of sharing information
drives efficiencies by closing the gap between intention and interpretation
simplifies data, allows better decision making and the creation of adaptive automation
allows regulation and compliance processes to be looked at differently

Bank of England Launches FinTech Accelerator

Jul 21 2016

By Jonathan Lawrence

On 17 June 2016 the Governor of the Bank of England announced that the Bank is launching a FinTech Accelerator to work in partnership with FinTech firms to harness innovations for its own requirements as a central bank. In return, it will offer firms the chance to demonstrate their solutions for issues facing policymakers. The Accelerator will deploy innovative technologies on issues that matter to the Bank’s mission and operations. The Accelerator will appoint FinTech firms to run short Proof of Concept (POC) projects in a number of priority areas.

Some examples of current projects:

BitSight: Uses publicly available bulk data to assess firms’ cyber resilience, including looking for evidence of malware on a firm’s systems, signs of known software vulnerabilities, or weak encryption, which can be used to form a view on the information security of a firm over time. For the POC, the Bank’s own resilience will be evaluated.
Privitar: Provides tools to anonymise and desensitise data. The Bank will first test this software on a manufactured dataset to examine the analytical value of the desensitised data. It will then look to assess the capability of the tool on data held internally to establish if this will allow the Bank to provide wider access to data for researchers within the Bank.
PwC: Understanding the technology of blockchain and distributed ledger, working with PwC. The team built a multi-node scalable distributed ledger environment, which contained several smart contracts to illustrate the applications of the technology. This has enabled the Bank to better understand the resiliency benefits and practical limitations of the technology.

The Bank is interested in new ways of structuring and analysing large data sets and data gained in regulatory reporting. Other areas of interest are around machine learning, particularly in relation to anomaly detection and pattern recognition. The Bank would welcome expressions of interest or proposals for the Bank to participate in, or act as a silent observer or partner with an existing pilot distributed ledger network. Pilots should test how the technology functions in ‘real world’ scenarios.

Impact of Brexit and UK FinTech

Jul 21 2016

by Jonathan Lawrence, Stephen Moller, Jacob Ghanty and Tom Wallace

A month has passed since the UK referendum vote to leave the European Union. Now that the initial dust is starting to settle, we have set out to examine various potential impacts on the UK FinTech sector. We consider areas including:

regulation and passporting
data protection and data sharing
anti-money laundering and know your customer
human capital
the role of banks
London as a global FinTech centre
venture capital

For our long form insight piece, please click here.

Global equity crowdfunding developments

Jul 19 2016

By Jim Bulling and Michelle Chasser

Australia’s equity crowdfunding reforms have been delayed due to the Australian federal election. After passing the House of Representatives back in February the Corporations Amendment (Crowd-sourced Funding) Bill 2015 lapsed in May when Parliament was dissolved. As the Turnbull Government was returned to power at the election it is likely the Bill will be reintroduced shortly. While crowdfunding changes have stalled in Australia developments have been continuing in the rest of the world .

Easier crowdfunding for FinTech start-ups in the USA has moved a step closer. The Fix Crowdfunding Act and the Supporting America’s Investors Act easily passed through the US House of Representatives on 6 July 2016 with bipartisan support and will now be introduced in the Senate. The Fix Crowdfunding Act will increase the maximum amount of money that a start-up can raise through crowdfunding from US$1 million to US$5 million. The Supporting America’s Investors Act increases the number of people allowed to invest in a qualifying venture capital fund from 100 up to 500. Read More

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