Key developments of interest over the last month include: HM Treasury announces package of crypto measures including next steps on UK regulatory approach to cryptoassets, stablecoins and DLT in financial markets; Philippines Central Bank announces digital financial marketplace model; and Treasury Secretary speech suggests U.S. is considering introducing stablecoin regulation.

For previous editions of the Global Payments Newsletter, please visit our Financial Services practice page.

On 4 April 2022, in a keynote speech at the Innovate Finance Global Summit 2022 John Glen MP, Economic Secretary to Her Majesty's Treasury (HMT), outlined a package of measures to ensure the UK financial services sector remains at the cutting edge of technology, and the UK is seen as a global cryptoasset technology hub.

On taxation of cryptoassets, the government will consider issues including the treatment of decentralised finance (DeFi) loans and staking (ie where crypto is leased to the blockchain whereas lending involves leasing crypto to a borrower). The establishment of a new Cryptoasset Engagement Group to help guide the government in its next steps was also announced.​

The speech also referred to the government's establishment of a Centre for Finance, Innovation and Technology Steering Committee, and the new regulatory oversight committee that will work with industry to implement the vision for the future of Open Banking in the UK.​

Also on 4 April 2022, HMT published its response to its January 2021 consultation and call for evidence on the UK regulatory approach to cryptoassets and stablecoins and its call for evidence on DLT in financial markets.

The response confirms HMT's intention to take the necessary legislative steps to bring activities that issue or facilitate the use of stablecoins as a means of payment into the UK regulatory perimeter. In addition, in view of the continued growth and uptake worldwide of cryptoasset activities, HMT intends to consult later on in 2022 on regulating a wider set of cryptoasset activities.

Following its call for evidence on the investment and wholesale uses of DLT, HMT recognises the substantial benefits and transformative impact that it could deliver when adopted in FMIs. It intends to support the industry in ensuring that regulations can accommodate tokenisation and DLT in FMIs. In particular, it is developing the FMI Sandbox mentioned above (to be up and running in 2023) to support firms wanting to innovate, including by using these technologies to provide FMI services.

For more on this development, take a look at this Engage article by members of Hogan Lovells' London office.

On 27 March 2022, the Bangko Sentral ng Pilipinas (BSP) announced that it is creating rules for a "digital financial marketplace" to facilitate innovations between financial service providers (FSPs), electronic money issuers (EMIs) and banks.

The digital financial marketplace model is anchored on the Open Finance Framework, which allows the sharing of financial data of consenting customers to create innovative financial solutions that cater to their needs.

The BSP is working on rules that will allow banks and EMIs to establish a digital marketplace where they can partner with FSPs to develop and offer a wide range of financial products and services to consumers. These include retail loan products, such as mortgages and credit cards, other retail financial products such as cash cards and debit cards, retail insurance products, collective investment schemes or pooled investment funds, and other financial products or services as may be authorised by the Monetary Board. These financial products or services should be duly approved or registered by the appropriate regulatory authority, if applicable.

The BSP is coordinating with relevant stakeholders and financial regulators to ensure that the proposed digital financial marketplace model is consistent with existing laws, rules and regulations.

On 7 April 2022, U.S. Treasury Secretary Janet Yellen delivered a speech on digital asset policy, innovation and regulation. This speech follows President Biden's Executive Order on digital assets that was covered in last month's Newsletter.

In the speech, Yellen listed stablecoins as one of the major policy concerns in the digital asset space for regulators, as they are currently subject to "inconsistent and fragmented oversight." Yellen said the Treasury Department was working with Congress to advance legislation to help ensure that "stablecoins are resilient to risks" for consumers and the U.S. financial system. According to the Treasury Secretary, while stablecoins raised "policy concerns" and issues around the coins' reserve assets, many parts of the digital asset space present potential risks that could exacerbate inequality.

Yellen emphasised the need for "tech neutral" regulation, highlighting the importance of protecting Americans over promoting business. Additionally, she stated that firms that have custody over digital assets for consumers should ensure that those assets are not lost, stolen or used without authorisation.

On 24 March 2022, the FCA published a notice to all FCA regulated firms with exposure to cryptoassets, reminding them of their existing obligations when interacting with or exposed to cryptoassets and related services.

The notice sets out an inexhaustive list of some of the areas of risk that firms must consider:

On 7 April 2022, the FCA published its three-year Strategy and Business Plan 2022/23. The FCA is changing its operating model to focus more on the (often cross-cutting) issues it encounters than on simply addressing types of firms or sectors.​

In outline, the FCA's three-year Strategy​ comprises:

The Business Plan explains in more detail the actions the FCA will take in 2022/23 to address the Strategy commitments under each key area of focus. For example, under 'Setting and testing higher standards' the commitment to 'put consumers' needs first' will include a focus on its proposed new Consumer Duty and the outcomes consumers get.​

Also in the Business Plan:

Both the Strategy and the Business Plan will be kept under review so that the FCA is adapting to important changes. For example, it expects the rising cost of living and the Russian invasion of Ukraine to have a lasting impact.​

For more on this development, take a look at this Engage article by members of Hogan Lovells' London office.

On 30 March 2022, the FCA updated its webpage on the cryptoasset anti-money laundering (AML) and counter terrorist financing (CTF) regime.

The FCA provides an update on the temporary registration regime (TRR) which was established in December 2020. The TRR allowed existing cryptoasset businesses which applied to register with the FCA under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 before 16 December 2020 to continue trading while their applications were being assessed. It has now concluded the assessments.

The TRR will close on 1 April 2022 for all except a small number of cryptoasset businesses where it is strictly necessary for them to continue to have temporary registration. The FCA explains that this is necessary where a cryptoasset business may be pursuing an appeal or may have particular winding-down circumstances. Of the 100-odd crypto businesses to apply for registration since 2020, the FCA has approved 33, with the others either being rejected or withdrawing their applications.

On 29 March 2022, the Payment Systems Regulator (PSR) published its annual plan and budget for 2022/23, together with a related factsheet.

On the whole, the PSR considers that the UK payment systems work well. However, there are issues that need to be addressed as the payments landscape evolves. These include the prevalence of authorised push payment (APP) fraud, risks to effective competition and the need to support the payments sector to deliver new and improved services. The PSR recognises that further challenges can also be expected as global events impact the cost of living.

The PSR's "ambitious" work programme for 2022/23 is guided by the following four key strategic priorities:

On 30 March 2022, the FCA published a call for input on the use of "synthetic data" to support financial services innovation. Synthetic data is defined as "a privacy preserving technique that involves generating statistically realistic, but artificial data, that is readily accessible".

The call for input explains how financial data can help to drive innovation, enable automation and improve decision-making and risk management, as well as personalisation of services. In addition, the ultimate potential benefits to society are greater market efficiency, financial inclusion and the prevention of financial crime. ​

The FCA notes that there are limitations on the use of financial data, which is highly sensitive and subject to data privacy laws. This limits the ability to use or share such data in the market.

The FCA has issued the call for input as an introductory exploration of market attitudes towards synthetic data, and its potential for opening data sharing between firms, regulators and other public bodies. It wants to understand industry views on the potential for synthetic data to support innovation and the requirements to be effective, as well as potential limitations and risks.​

Responses to the call for input can be made until 22 June 2022. ​Once the call for input closes, the FCA plans to publish a feedback statement setting out its analysis, findings and any next steps.​

On 29 March 2022, the Money Laundering and Terrorist Financing (High-Risk Countries) (Amendment) Regulations 2022 (Amendment Regulations) were made and came into force. Under the changes introduced by the Amendment Regulations, Zimbabwe is no longer classed as a high-risk third country for the purposes of enhanced customer due diligence requirements, but the United Arab Emirates is now classed as a high-risk third country for these purposes.

On 4 April 2022, the FCA published a speech given by the FCA's Chief Data, Information and Intelligence Officer on building a digital regulator and how the FCA is riding the innovation wave.

Points of interest in the speech include that the FCA:​

The FCA also announced two new initiatives:

On 23 March 2022, the Competition and Markets Authority (CMA) published a letter sent to the OBIE following an update from the OBIE on the status of items in the Roadmap for the final stages of Open Banking implementation.

The CMA noted that the UK's nine largest current account providers (the CMA9) have three remaining items that require implementation:

The CMA requested the OBIE to continue to monitor progress and to keep the CMA updated. It noted that progress with implementation of the Roadmap may vary among the CMA9 and it will take a reasonable and pragmatic approach to determining completion of the implementation phase of the Roadmap. However, it expects to be able to determine that the Roadmap has been completed later in 2022.

On 14 April 2022, the CMA published a further letter sent to the OBIE in response to a letter from the OBIE providing a further update on the status of items in the Roadmap for the final stages of Open Banking implementation. This follows the above exchange of letters and status update in March 2022. The CMA welcomes this update which reflects progress made following publication of the final version 3.1.10 of the Open Banking standard within the final Roadmap. The CMA also notes that OBIE has clarified the status of the delivery of the enhanced management information (MI) submission mechanism within the Roadmap. While not a mandatory item with implementation requirements for the CMA9, given the benefits of automated MI the CMA encourages the CMA9 to continue to work to deliver this.

The CMA’s position on determining completion of the Roadmap remains unchanged, with the exception that delivery of the enhanced MI submission mechanism will not be considered as a requirement for the CMA9. The Roadmap's completion will have implications for the timing of the transition to future arrangements for Open Banking.

On 25 March 2022, the CMA published its recommendations on the future oversight of its Open Banking remedies.

The CMA notes that it cannot require the nine largest banks and building societies, whether directly or through the Opening Banking Implementation Entities (OBIE) or any future entity, to take action to develop Open Banking beyond the scope of the 2017 Retail Banking Market Investigation Order or expand its application to markets or financial services sectors beyond retail banking.

The CMA considers that the future entity should:

The CMA expects the OBIE to develop a detailed plan for transition and an appropriate governance process for the planning and execution of transition, which should include consultation with industry and other key stakeholders, including consumer and SME representatives.

On 8 April 2022, the International Monetary Fund (IMF) published a number of reports focused on the UK under its Financial Sector Assessment Program (FSAP).

On 25 March 2022, the Competition and Markets Authority (CMA) announced that the Digital Regulation Cooperation Forum's (DRCF) new digital regulation research portal has been launched.

The DRCF digital regulation research portal brings together over 80 pieces of recent research on emerging and future digital developments from eight regulatory bodies, including the DRCF members and the Intellectual Property Office, the Bank of England, the Advertising Standards Authority and the Gambling Commission.

By ensuring that this body of knowledge is publicly available, fully accessible and easily discoverable, the DRCF hopes to better equip all who are interested in contributing to the shape of digital regulation in the UK.

On 4 April 2022, HM Treasury published the terms of reference for the Centre for Finance, Innovation and Technology (CFIT) Steering Committee.

The Kalifa Review of UK FinTech recommended the establishment of a new private sector-led organisation focused on driving forward financial innovation (that is, CFIT). The purpose of CFIT is to bring together experts from across the ecosystem, including finance and tech, to identify and address barriers and opportunities for UK FinTech.

The Steering Committee is chaired by Ron Kalifa OBE and its membership comprises a range of industry experts, including representatives nominated on behalf of the UK's regional and national FinTech hubs. HM Treasury, the FCA and the City of London Corporation are also represented.

The Committee will meet monthly over the spring and summer of 2022 to develop a comprehensive proposition for CFIT. This will include making non-binding recommendations on key strategic points, which will then be considered by the permanent CFIT board and executive once established.

On 7 April 2022, the European Parliament published a press release announcing that it has agreed its negotiating mandate on the proposed Regulation on information accompanying transfers of funds and certain cryptoassets (2021/0241(COD)) and has agreed to start negotiations with the Council of the EU on the proposed Regulation. The Council adopted its negotiating mandate for the proposed Regulation in December 2021.

The proposed Regulation, which is intended to revise and recast the revised Wire Transfer Regulation ((EU) 2015/847), was adopted by the Commission in July 2021 as part of a package of measures to reform the EU anti-money laundering and counter-terrorist financing regime.

In March 2022, the Parliament's Economic and Monetary Affairs Committee (ECON) voted to adopt a report containing suggested amendments to the proposed Regulation, the text of which was published on 1 April 2022. The minutes for the plenary session of the Parliament on 4 April 2022 and 6 April 2022 confirm that ECON and the Committee on Civil Liberties, Justice and Home Affairs (LIBE) have been permitted to commence negotiations on the basis of the report.

On 6 April 2022, the European Parliament plenary session adopted its first-reading position on the European Commission's proposal for a new Regulation on European data governance (Data Governance Act).

The draft Data Governance Act (DGA) was first proposed in November 2020 and seeks to increase trust in data sharing, create new rules on the neutrality of data marketplaces and facilitate the use of public sector data.

The next steps are for the DGA to be formally adopted by the Council before it is published in the Official Journal of the EU and enters into force.

On 5 April 2022, the European Commission published a targeted consultation on a digital euro. The consultation follows on from the ECB’s October 2020 consultation which sought views on the benefits and challenges of issuing a digital euro and on its possible design.

The Commission’s consultation aims to collect further information from relevant authorities and experts including payment service providers, payment infrastructure providers, developers of payment solutions, merchants, retail payments regulators and AML supervisors. The issues on which the Commission would like feedback are: users’ needs and expectations for a digital euro; the digital euro’s role for the EU’s retail payments and the digital economy; making the digital euro available for retail use while continuing to safeguard the legal tender status of euro cash; the digital euro’s impact on the financial sector and financial stability; application of AML/CFT rules; the privacy and data protection aspects; and international payments with a digital euro. The consultation closes on 14 June 2022.

In a related development, on 30 March 2022 the ECB published the findings of its commissioned research on citizens' payment habits and their attitudes towards digital payments in order to gain a deeper understanding of user preferences as part of the digital euro project.

Among other things, the findings showed a strong preference for payment methods with pan-European reach and universal acceptance in physical shops and online. Participants demonstrated little knowledge of the digital euro, but they generally agreed that banks and/or central banks would be the safest and most reliable providers. They also expressed the view that a digital euro should not undermine cash.

The report's findings will feed into the ongoing digital euro investigation phase, which is expected to conclude in October 2023.

On 8 April 2022, the European Commission launched the EU Digital Finance Platform.

The Platform is a new website designed to build better dialogue between innovative financial firms and supervisors. Its aims are to overcome fragmentation and support the scaling up of digital financial services. The Platform consists of:

On 5 April 2022, the Central Bank of Ireland (CBI) set out a number of amendments to the list of pre-approval controlled functions (PCF).

The key changes likely to impact Irish e-money and payments firms are that:

Firms should notify the CBI which of their directors is a PCF-2B independent non-executive director by 3 June 2022.

Noting the importance of diversity and inclusion, the CBI has also amended the PCF roles titled ‘Chairman’ to ‘Chair’.

Certain other amendments have also been made, including removing PCF-31 head of investment and expanding PCF 16 branch managers in other EEA countries to include branch managers in third countries.

On 7 April 2022, the Reserve Bank of India (RBI) issued guidelines allowing scheduled commercial banks to open digital banking units (DBUs). These will be specialised fixed point business units to deliver digital banking products and services to customers.

The guidelines are based on the recommendations of a working group set up by the regulator, which included representation from banks and the Indian Banks' Association. With the exception of regional rural banks, local area banks and payments banks, all scheduled commercial banks with past digital banking experience are allowed to open DBUs without prior approval of the RBI.

The aim of DBUs is to enable customers to have cost-effective and convenient access to products and services and an improved digital experience.

The drive towards real-time digital payments in the UAE is set to accelerate this year with the introduction of a scheme that is due to launch in the fourth quarter of 2022. The UAE Instant Payments Platform (IPP) will enable transfers between bank accounts on a 24x7x365 basis.

As part of the country's National Payments Systems Strategy, the IPP aims to provide best-in-class services, promote financial inclusion, and increase financial stability. Participation in the IPP scheme is mandatory for all financial institutions and banks.

The Central Bank of the UAE has published the below timetable for the real-time payments scheme:

On 5 April 2022, the Parliament of Singapore passed a new cryptoasset law that requires crypto businesses based in the city-state operating on foreign soil to comply with anti-money laundering and anti-terrorism measures. The new law is aimed at expanding the powers of the Monetary Authority of Singapore (MAS) and addressing regulatory weaknesses in the cryptoasset space. It was passed as part of the Financial Services and Markets Bill, which states that domestic virtual asset service providers operating overseas will be required to obtain a licence.

In April 2022, Cameroon, the Democratic Republic of the Congo (the DRC) and the Republic of the Congo announced their intention to adopt cryptocurrency and blockchain based solutions to drive future economic progress.

The three countries recently published separate press releases in which they outlined their initial thoughts on cryptocurrency and how they plan to integrate it into their respective economies. The countries mentioned that they are in discussions with The Open Network (TON) to help launch their first crypto initiatives.

TON has been engaging with all three countries independently for some time and has taken the lead in delivering cryptocurrency and blockchain solutions for each nation. These countries will each undertake a phased transition to adopting cryptocurrency as a central pillar of their economic structures.

On 31 March 2022, the Financial Stability Board (FSB) published its 2022 work programme.

The FSB's work priorities reflect the fact that financial challenges are global in nature and affect the financial system as a whole. These challenges include digitalisation, climate change and potentially also shifts in the macroeconomic and interest rate environment.

Priority areas of work and new initiatives include the following:

On 24 March 2022, IOSCO published a report on decentralised finance (DeFi).

The report aims to provide a general understanding of DeFi as well as its features and protocols, including the key areas of potential regulatory concern. It observes that DeFi is quickly evolving to mirror conventional financial markets and highlights the need to understand the regulatory implications that arise from DeFi.

The report notes that lending and borrowing protocols are two of the primary DeFi products currently available. The report also notes that understanding the regulatory implications arising from DeFi requires analysing the totality of a DeFi ecosystem as it exists currently, its interrelationship with centralized cryptoasset trading platforms and service providers and traditional markets and activities, and how it may continue to develop in the future.

In response to the report, IOSCO announced the creation of a new task force that will cover the DeFi market.

IOSCO called for comment and input from the public, including cryptoasset market and DeFi participants and from any other interested party, on the issues raised in its report, as well as on any other cryptoasset or DeFi related matters. Comments can be submitted to DeFi@iosco.org.

On 13 April 2022, the Australian Treasury and the Monetary Authority of Singapore (MAS) signed an Australia-Singapore FinTech Bridge Agreement.

The FinTech Bridge aims to build on the overarching framework for digital economy cooperation under the Australia-Singapore Digital Economy Agreement, which was signed in 2020, in order to deepen collaboration between the FinTech ecosystems of both countries.

The Australia-Singapore FinTech Bridge sets out a framework for both authorities to deepen bilateral and multilateral cooperation on fintech, so as to facilitate trade, investment and ecosystem development in the fintech sector.

The framework will also support the mutual establishment of fintech companies looking to expand in each other's markets, and encourage fintech companies to use the facilities and assistance available to explore new business opportunities and reduce barriers to entry. It will also help both authorities build on current engagements to strengthen linkages between Australia and Singapore for policy officials, regulators and industry groups.

On 12 April 2022, the Council of the EU adopted the proposed Regulation on a pilot regime for market infrastructures based on distributed ledger technology (DLT). This followed the European Parliament adopting the proposed Regulation on 24 March 2022.

The Regulation will enter into force 20 days after it is published in the Official Journal of the EU and will apply nine months after the date it has entered into force, except for certain Articles which will apply from 4 July 2023.

On 24 March 2022, the Financial Policy Committee (FPC) published a Financial Stability in Focus report on cryptoassets and decentralised finance (DeFi).

The report identifies the financial stability implications for cryptoassets and associated markets, sets out the risks to financial stability, outlines the FPC's approach to monitoring risks and its assessment of the risks presented by cryptoassets and DeFI, and summarises regulatory initiatives to mitigate those risks.

The FPC's views arising from the risks presented by cryptoassets and DeFI include:

On 24 March 2022, the Bank of England (BoE) published the financial policy summary and record (FPSR) of the meetings of its Financial Policy Committee (FPC) on 9 and 18 March 2022.

Announcements made in the FPSR relate to topics including:

On 24 March 2022, the PRA published a Dear CEO letter to banks and designated investment firms setting out how the prudential framework applies to ensure that firms engaging in cryptoasset activity manage the risks in a way that supports the firm's safety and soundness.

The letter is written in the context of the current limited existing exposures by firms to cryptoassets, and in the light of pending international regulatory updates. It aims to ensure that firms with such exposures understand the PRA's expectations around risk management and measurement against the existing prudential framework.

As no single part of the current prudential framework fully captures crypto risks, the letter expands on the combination of areas that firms will need to consider. These include strong risk controls, operational risk assessments, robust new product approval processes, Pillar 1 (the letter focuses on market risk and counterparty credit risk), Pillar 2, as well as ongoing monitoring arrangements.

Given the expansion in crypto activities being contemplated by firms, the PRA is undertaking a survey of firms covering existing crypto exposures and planned exposures for 2022, with a deadline for responses of 3 June 2022.

On 24 March 2022, the FCA updated its webpage on operational and cyber resilience in the light of the conflict in Ukraine.

It notes that the National Cyber Security Centre (NCSC) has supported U.S. President Biden's call for increased cyber security vigilance in response to the situation in Ukraine, and recommends firms follow the NCSC's actionable guidance as a priority, to reduce their risk of cyber compromise.

On 1 April 2022, the Council of the EU published a note from the General Secretariat to the Delegations with a three-column table to commence trialogues, comparing the negotiating positions taken by the European Commission, the Council and the European Parliament on the proposed Regulation on markets in cryptoassets (MiCA).

This followed the European Parliament publishing the text (dated 17 March 2022) of the report adopted by its Economic and Monetary Affairs Committee (ECON) on the European Commission's legislative proposal for the MiCA Regulation.

On 21 March 2022, the Financial Stability Board (FSB) published a report on the impact of the COVID-19 pandemic on FinTech and market structure and its implications for financial stability.

The FSB examined whether the pandemic had changed the ways in which individuals and firms engage with innovative financial service providers and traditional financial incumbents, analysing whether the market share of BigTechs and FinTechs in specific financial services changed materially compared to incumbent financial institutions during this time.

The FSB concluded that the pandemic had a significant impact on market structure in retail financial services. It believes that trends towards digitalisation of financial services have accelerated and that at least some of these changes may persist. It warns that the financial stability implications of these trends are increasing. These include greater market share by new entrants and a greater use of a partnership model between incumbents, FinTechs and BigTechs. It notes that many authorities are enacting specific entity-based rules on BigTechs intended to address issues of financial stability, competition and data governance, as well as the development of international work on third-party dependencies in the financial sector, including in relation to cloud computing.

On 24 March 2022, the Bank of England (BoE) published a paper reporting on responses it has received to its June 2021 discussion paper on new forms of digital money.

Among other things, the BoE reports that:

In terms of next steps, the BoE states that, while it has not yet made a decision on any of the topics in the discussion paper, the feedback received had shown strong support for it to continue its work in this area. However, it noted that respondents were clear about three things: access to cash should be preserved, the BoE should continue to engage with stakeholders, including the wider public, and any regulation for systemic stablecoins should be clear, proportionate, and risk-based.

On 24 March 2022, the EBA published a letter to the EU co-legislators on the views of anti-money laundering (AML) and counter-terrorist financing (CTF) experts from competent authorities on the legislative proposals adopted by the European Commission in July 2021 as part of a package of measures to strengthen the EU's AML and CTF rules.

In the note, the experts provide comments and specific proposals on aspects of the package relating to:

On 22 March 2022, the EBA published a report setting out the findings of the second round of its implementation reviews of competent authorities' approaches to the anti-money laundering (AML) and countering the financing of terrorism (CTF) supervision of banks in the EU and EEA.

The EBA found that all the competent authorities reviewed had undertaken significant work to implement a risk-based approach to AML and CTF. Supervisory staff had a good understanding of international and EU AML and CTF standards and were committed to tackling financial crime.

However, competent authorities continue to face challenges in operationalising the risk-based approach to AML and CTF. Common challenges include:

The EBA also found that co-operation with financial intelligence units was not always systematic and often ineffective.

On 31 March 2022, the FCA published its regulation round-up for March 2022.

Among other things, in this edition the FCA:

On 28 March 2022, the FCA published a new webpage on Innovation Hub market insights, providing information on the type of firms and technology supported by the Regulatory Sandbox and Innovation Pathways, including firm sizes, sectors and locations.

The FCA's Innovation Hub has been helping firms to develop innovative products and services since launching in 2014. During this period, due to the number of firms they have supported and engaged with, they have gathered a considerable quantity of data and insights into the growing fintech market in the UK. This page is the first step in sharing these insights with the broader market, and is intended to grow over time as the FCA collects more data.

On 24 March 2022, the UK and Canada formally launched negotiations for an updated free trade agreement (FTA), which will build on the existing UK-Canada Agreement on Trade Continuity. The UK government has also published a document setting out its objectives for the negotiations, its response to the public consultation on the negotiations and an assessment of the potential economic impact of the updated FTA. The document indicates that the government will, among other things, seek to agree to enhanced digital trade provisions, including to support the free flow of data while ensuring that protections for personal data are maintained.

On 31 March 2022, the ECB published its annual report for 2021.

The report includes a section on risks and the ECB's supervisory priorities for 2022. The ECB explains that in 2021, in co-operation with the national competent authorities, it assessed the main risks and vulnerabilities faced by significant institutions and identified three priorities aimed at ensuring that supervised institutions:

For each priority, the ECB has developed a set of strategic objectives and work programmes for the period 2022-24, to address the most material vulnerabilities identified during its risk assessment.

On 29 March 2022, the Wolfsberg Group published guidance on digital customer lifestyle risk management.

The Group explains that digital approaches to customer lifecycle risk management challenge the traditional view that in-person customer engagement is necessary for firms to know their customers and assess the financial crime risk they present. Non-face-to-face customer interaction, if defined and calibrated responsibly, may be a standard or lower risk engagement channel, providing firms with an opportunity to adopt new approaches to manage customer risk, address issues of financial inclusion and address genuine financial crime threats.

The guidance explains how non-face-to-face customer interaction could be considered a standard or lower risk channel for a firm if it:

On 4 April 2022, the EBA updated its webpage on its guidelines on risk-based supervision under Article 48(10) of the Fourth Money Laundering Directive ((EU) 2015/849) (MLD4) to state that the guidelines have been translated into the official languages of the EU.

The EBA published the guidelines in December 2021. National authorities now have two months to report whether they comply with the guidelines. The revised guidelines will apply three months after publication of the official language versions (that is, 4 July 2022), when they will repeal and replace the original 2016 version of the guidelines.

On 5 April 2022, the EBA published a final report on its amendment of the regulatory technical standards (RTS) for strong customer authentication (SCA) and common and secure open standards of communication (CSC) under PSD2.

The changes introduce a new mandatory exemption to SCA that will require account providers not to apply SCA when customers use an account information service provider (AISP) to access their payment account information, provided certain conditions are met. The amendment aims to reduce frictions for customers using such services and to mitigate the impact that the frequent application of SCA and the inconsistent application of the current exemption have on AISPs' services. The RTS also limit the scope of the voluntary exemption in Article 10 of the RTS to instances where the customer accesses the account information directly and extend the timeline for the renewal of SCA from every 90 days to every 180 days, both when the information is accessed through an AISP and when it is accessed directly by the customer.

The EBA will now submit the draft amending RTS to the European Commission for approval and scrutiny by the European Parliament and the Council of the EU before being published in the Official Journal of the EU. The amending RTS will apply seven months after entry into force.

On 4 April 2022, the House of Lords Communications and Digital Committee published a letter from the Competition and Markets Authority (CMA) sent in response to a request from the Committee Chair for an update on the CMA's future digital work plans.

The CMA states that its overall strategy in digital markets involves preparing to put the government's proposed new digital markets framework into action through the Digital Markets Unit (DMU) as soon as the relevant legislation is passed, but in the meantime using its current powers to tackle problems wherever possible.

Online advertising is one of the key areas in which the CMA has gathered convincing evidence of competition problems. Consumer law investigations covering social media endorsements and fake online reviews are also a focus for the CMA. The CMA considers that its mobile ecosystems market study, due to conclude in June 2022, will provide a detailed evidence base for DMU action once the new tools are in place.

The CMA has also identified options for taking further action in digital markets ahead of the DMU receiving its powers and will further scope these potential projects with a view to launching new investigations.

On 30 March 2022, the Department for Digital, Culture, Media and Sport (DCMS) published the Cyber Security Breaches Survey 2022.

The survey's key findings include that:

The DCMS said that the report shows that cyber-attacks are becoming more frequent, with organisations reporting more breaches over the last 12 months, although the number of businesses which experienced an attack or breach remained the same as 2021 levels. The DCMS urges businesses and charities to strengthen their cyber security practices.

On 13 April 2022, the ECB published an opinion (dated 11 April 2022) on the proposed Directive on measures for a high common level of cybersecurity across the EU repealing the NIS Directive ((EU) 2016/1148) (2020/0359(COD)) (revised NIS Directive). The ECB comments specifically on the following aspects of the proposed Directive:

On 25 March 2022, the European Commission and the United States published a joint statement on their agreement in principle to a new Trans-Atlantic Data Privacy Framework (Framework).

According to the accompanying factsheet, the Framework will include:

The agreement in principle now needs to be incorporated into legally binding documents. An Executive Order in the U.S. will form the basis of a draft adequacy decision by the European Commission which will then need to follow the formal adoption process under the GDPR. It may therefore be some time before organisations can rely on the Framework.

For more on this development, take a look at this Engage article by members of Hogan Lovells' London office.

On 14 April 2022, the Bank of England (BoE) published three consultation papers on outsourcing and third party risk management in financial market infrastructures (FMIs):

For RPSOs and SSPs, the BoE is proposing to develop an outsourcing and third party risk management part to add to the Code of Practice (code) published under section 189 of the Banking Act 2009, which came into effect in June 2018. It is also consulting on a draft supervisory statement that introduces a set of supervisory expectations to complement the code. Again, these expectations are not binding, but they will provide relevant RPSOs and SSPs with guidance on how it intends to assess compliance with the outsourcing and third party risk management part of the code.

For CCPs and CSDs, the BoE is consulting on draft supervisory statements that introduce a set of supervisory expectations that are not binding but will provide these FMIs with guidance on how it intends to assess compliance with the regulatory framework on outsourcing and third party risk management.

The BoE's stated policy objective is to facilitate greater resilience and adoption of the cloud and other new technologies, as set out in its response to the Future of finance report (June 2019). The draft expectations also complement its March 2021 supervisory statements on FMI operational resilience.

The BoE will continue to monitor developments in industry practice and the international regulatory landscape to assess whether further changes are required. It refers in particular to ongoing discussions about systemic concentration risk, systemically significant third parties and their potential implications on financial stability, its expected joint discussion paper on critical third parties, and a potential consultation on detailed proposals to require FMIs to report information on their outsourcing and third party dependencies.

The deadline for responses to the consultation papers is 14 July 2022. The BoE plans to publish its final policy in the second half of 2022 and will allocate sufficient time for firms to implement this afterwards.

On 12 April 2022, the FCA published an updated version of its webpage on financial sanctions.

Among other things, the FCA advises firms (including those operating under the Temporary Permissions Regime (TPR)) that, under Principle 11 of its Principles for Businesses (PRIN), it expects them to notify it without delay if they (or their appointed representatives or agents) are subject to any financial sanctions, directly or indirectly. This includes sanctions listed by the Office of Financial Sanctions Implementation (OFSI) as well as sanctions listed by any other country or jurisdiction. Dual-regulated firms should also notify the PRA.

For firms such as electronic money institutions (EMIs), payment services firms, cryptoasset businesses and Annex I financial institutions, this is regarded as a material change of circumstance and the FCA expects to be informed if these firms, or any connected entities, are subject to financial sanctions.

Firms should notify the FCA in line with SUP 15 requirements through the usual reporting mechanisms.

On 8 April 2022, Strike, the digital payments platform built on Bitcoin's Lightning Network, announced its partnership with Shopify, unlocking the ability for eligible U.S. Shopify merchants to receive Bitcoin payments from customers globally as U.S. dollars.

On 5 April 2022, Visa announced its partnership with PopID, a consumer verification service. Together they will collaborate on launching facial verification payment acceptance in the Middle East region. The goal of the partnership is to provide cardholders with new safe, secure, and innovative ways to pay.

On 30 March 2022, Santander announced a payment solution allowing customers from Europe to make transfers into Brazil in local currency in real time. This new service will shorten payment times from several days to minutes and removes the need for intermediaries and FX documentation.

On 29 March 2022, Tenemos announced a collaboration with Mastercard that will accelerate the take-up of its Request to Pay service among UK banks. Tenemos and Mastercard aim to accelerate market adoption, enabling complete end-to-end, real-time processing and secure and successful communication between buyers and payers.

On 28 March 2022, Wells Fargo announced a partnership with Bilt Rewards and Mastercard. Together they will launch the first-of-its-kind co-branded credit card that allows members to pay rent and earn points with no transaction fees on rent payments at any rental property in the U.S.

On 22 March 2022, RobinHood announced their new Cash Card which will allow users to automatically invest their spare change into stocks and cryptocurrency as they spend. The Cash Card builds on their mission to democratise finance by giving debit card customers the same benefits and rewards that were once reserved for credit card holders.

On 16 March 2022, eBay announced its partnership with Klarna, the buy now, pay later provider. Together they will offer millions of German customers more flexible payment options.

On 21 March 2022, Mastercard announced its partnership with HSBC to launch a new business-to-business (B2B) payment solution in the UK - Mastercard Track Card to Account Transfer – which allows businesses to use their commercial card programme to make payments to any supplier, regardless of whether the supplier accepts card payments.

On 18 March 2022, the United Bank of Africa and Cellulant, a pan-African payments company, announced their partnership which will extend payment services for merchants and consumers across 19 African countries in which the United Bank of Africa operates.

On 24 March 2022, the ANZ bank announced it had successfully executed the first ever Australian-bank issued Australian dollar stablecoin (A$DC) payment through a public permissionless blockchain transaction.

On 1 March 2022, Merchant Machine published a study on mobile wallets which details how people use mobile wallets in different countries, at different ages and with different mobile wallets.

In particular, the study found that:

On 30 March 2022, the Royal Society of Arts published a new piece of research which explored the use of cash in an increasingly digital economy.

In summary, the research found that:

The research showed that despite online banking and shopping becoming more common, the percentage of the UK population wholly reliant on cash is unchanged.

On 4 April 2022, Checkout published a report titled 'Demystifying Crypto: Shedding light on the adoption of digital currencies for payments in 2022'. The report is a comprehensive look at how both consumers and merchants in 11 countries are evaluating opportunities to adopt digital currencies.

In short, their report found that 30% of UK consumers, and 40% of global consumers, intend to use crypto as a form of payment in 2022.

Additionally, the research found that merchants are also keen to progress crypto's place in the payments system. Almost 70% of the merchants surveyed for the report believe that the speed of crypto payments has the potential to revolutionise their business models, with 80% of those already using crypto payment options saying that it was easier to settle in crypto than using fiat currencies.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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