As we welcome in the New Year, regulators are looking forward to 2023 and beyond, particularly when it comes to crypto.
In the last weeks of 2022, Banking Circle took home two 2022 Nordic DAIR Awards: Best AI Start-up and Best use of Predictive/Prescriptive Analytics of the Year. We were also delighted for Banking Circle to be shortlisted for two FStech awards: Best Payments Innovation and Best use of Artificial Intelligence in Financial Services.
Towards the end of the month, we published our podcast where a panel of experts from Ripple, Paxos, and Banking Circle discussed how crypto could be regulated without hampering innovation.
Here are some other important stories from the industry you may have missed in December:
Crypto regulation takes a front seat
After a turbulent year in crypto, the need to expedite the regulation of crypto-assets has been a widely discussed topic during December.
Regulators from around the world have been working on legislation, including MiCA in the EU, and recommendations from the Basel Committee on Banking Supervision (BCBS) and Financial Stability Oversight Council (FSOC). In the UK, the Financial Services and Markets Bill is underway, which includes a broad definition of crypto-assets that will be subject to regulation.
But it’s not only regulators calling for reform. Coinbase CEO and Co-founder, Brian Armstrong, provided a blueprint of what he thinks needs to happen to move the crypto industry forward.
Read more on that here.
‘Edinburgh Reforms’ backed by City of London executives
Chancellor of the Exchequer, Jeremy Hunt, announced more than 30 regulatory reforms to help boost the UK financial services industry and secure its position as an attractive place to do business post-Brexit.
The official press release states: ‘The Chancellor will set out plans to repeal, and replace, hundreds of pages of burdensome EU retained laws governing financial services. This will establish a smarter regulatory framework for the UK that is agile, less costly and more responsive to emerging trends.’
While the City welcomed this news, Sir John Vickers, a senior economist who led the independent commission reviewing the UK banking industry after the financial crisis, has called the deregulation plans a ‘dangerous mistake‘. Bank of England Governor, Andrew Bailey, also warned against the government going too far in rolling back regulation a few days after the announcement of the plans.
Notable changes include repealing and replacing EU-era Solvency II – the rules governing insurers’ balance sheets, changes to MiFID, reforming the Ring-Fencing Regime for banks, and a consultation on information requirements in the Payment Account Regulations, which is open now for payment services providers to respond to.
Read more about the changes here.
Bank of England seeking a “proof of concept” for CBDC wallet
The Bank of England (BoE) published a request for applications for a wallet that would be able to hold Central Bank Digital Currency (CBDC). The BoE has issued several releases throughout 2022 indicating that they are exploring CBDC, and this appears to be another step toward building a case for a digital currency in the UK.
Read more here.
Joint statement on future vision and governance of open banking
HM Treasury, Competition and Markets Authority (CMA), the Financial Conduct Authority (FCA) and the Payment Systems Regulator (PSR) issued a joint statement to provide an update on the future of Open Banking in the UK.
The statement outlined that there are plans for a successor to the Open Banking Implementation Entity (OBIE), however, it was unclear what the governance of the future body or its funding mechanism will look like.
In response, an open letter was written by the Coalition for a Digital Economy and signed by the trade association FDATA, alongside 17 FinTechs criticising the lack of clarity.
More on that here.
European Central Bank continues to investigate digital euro
The European Central Bank (ECB) has made further progress on the investigation stage of a digital euro, publishing a second report outlining the latest developments.
This second report lays out:
- the role of intermediaries, responsible for the onboarding of end-users, anti-money laundering checks and consumer-facing services, such as payment initiation solutions;
- the settlement model, which defines who will settle online or offline transactions;
- the way in which funding and defunding will take place to allow users to convert cash and money from a bank account into digital euro;
- the distribution model. A digital euro scheme is envisaged since it is best suited to guaranteeing that all euro area citizens can pay and be paid in digital euro.
Download the full report here.