The Monetary Authority of Singapore (MAS) has put forward proposals which set out the behaviour of business representatives and the means available to consumers in order to limit the potential damage resulting from the use of payment tokens. The proposal also sets out minimum technology and cyber risk management requirements for DPT service providers.

As regards the behaviour of business representatives, MAS intends to issue guidelines for DPT service providers to implement the following measures, i.e.:

• identification, mitigation and clear disclosure of potential and actual conflicts of interest
• publication of policies, procedures and criteria governing the inclusion in the DPT list
• establish effective policies and procedures to deal with customer complaints and dispute resolution

With regard to measures available to consumers, DPT service providers should, in MAS’s view, discourage retail clients from speculation in cryptocurrencies by:

• identification of customer risk awareness for access to DPT services
• not offering any incentives to trade cryptocurrencies
• non-provision of financing, margins or leveraged transactions
• non-acceptance of payments with credit cards issued locally
• limit the value of cryptocurrencies when determining the net value of a client

The MAS regulatory measures for DPT services will be implemented in stages from mid-2024. This will ensure an appropriate transitional period for DPT service providers that will allow for the correct implementation of these measures.

More information on:

https://www.mas.gov.sg/news/media-releases/2023/mas-strengthens-regulatory-measures-for-digital-payment-token-services

The UK Financial Supervisory Authority (FCA) announced a call for notifications (Call for Input (CFI). Through these, the FCA seeks to respond to whether the situation of ‘data asymmetries’ has enabled the Big Tech companies to gain more market power. According to the statements collected by the FCA this year, there are industry concerns about possible data asymmetries between Big Tech and others. This is because Big Tech’s data sets are outside the rules on data sharing, while the datasets of financial services firms are not. This means that Big Tech can access the financial services concerned, but not vice versa.

The FCA explained that the data available under the sharing initiatives can be combined with data from the core digital activities of Big Tech, which can then be used through intelligence and artificial intelligence to “enhance competition”.

By accessing Big Tech datasets, the competitive disadvantage of Big Tech vis-à-vis firms providing financial services can be mitigated, as these data reveal an insight into consumers’ risks and financial profiles, which weighs the market situation.

The FCA also wants to explore how the concentration of consumer data can benefit Big Tech. Respondents were also asked to inform the FCA of any other means by which Big Tech can gain an advantage over its competitors in the UK market.

Participants in the CFI included financial services providers, competitors, including fintechs, industry organisations, consumers, consumer interests groups, national and international competition authorities and regulators, and Big Tech themselves. The information is open until 22 January 2024.

More information on:

https://www.fca.org.uk/publication/call-for-input/potential-competition-impacts-data-asymmetry-between-big-tech-firms-and-firms-financial-services.pdf

The Monetary Authority of Singapore (MAS) launched a new funding stream under the Guardian project, focusing on the tacit issuance of Variable Capital Company (VCC) funds in digital asset networks. This area is intended to address tax, political and legal issues, while increasing the distribution channels for asset managers.

The Project Guardian Group, composed of 17 financial institutions, launched 5 additional industry pilots to test promising cases of asset tokenisation. This potentially paves the way for integration throughout the capital markets value chain, including listing, distribution, trading, clearing and asset servicing.

Financial institutions shall, inter alia, test: institutional level mechanisms to effectively price and execute bilateral digital asset transactions and to study real-time reporting and analysis of digital asset transactions. They also cooperate on the use of digital assets to allow for more liquid investment and management of discretionary portfolios and alternative assets, together with automated portfolio rebalancing.

MAS is also exploring an open, digital infrastructure project that will operate tokenised financial assets and applications. This new initiative, called Global Layer One (GL1), will facilitate liquid cross-border transactions and allow for trading in global liquidity pools, while complying with relevant regulatory requirements and guidelines. The participation of public-private stakeholders will help to ensure that the underlying digital infrastructure is established in line with international standards.

MAS also cooperates with the financial industry to develop a model of interconnected networks (INM), which will serve as a common framework for the exchange of digital assets in independent networks. This will enable financial institutions to carry out transactions with each other without having to use the same network.

More information on:

https://www.mas.gov.sg/news/media-releases/2023/mas-partners-financial-industry-to-expand-asset-tokenisation-initiatives

The Monetary Authority of Singaporee (MAS) announced the successful completion of the first phase of the MindForge project, which aims to develop a risk framework for the use of GenAI in the financial sector. A White Paper detailing the risk framework will be published in January 2024.

The MindForge project aims to develop a clear and concise framework for responsible use of GenAI in the financial industry and catalyse GenAI-based innovations to address common industry challenges and improve risk management. The project is supported by a consortium composed of a dozen banks and technology companies.

In the first phase, the Consortium developed a comprehensive GenAI risk framework with seven risk dimensions identified in the areas of cybersecurity and data security. This framework will allow financial institutions to use GenAI in a responsible manner. The GenAI reference architecture has also been developed, independent of the platform. It contains a list of components and components that organisations can use to build a solid technological capability of GenAI at company level.

The Consortium will examine GenAI’s applications for compliance, risk identification and other AI technologies, extending them to the insurance and asset management sectors. The next phase will focus on broader anti-money laundering and cybersecurity applications.

More information on:

https://www.mas.gov.sg/news/media-releases/2023/mas-partners-industry-to-develop-generative-ai-risk-framework-for-the-financial-sector

On 7 November 2023, the Council of the European Union and the European Parliament reached an agreement on the proposal for instant payments. The agreement is to improve the availability of instant payment options in euro to consumers and businesses in the EU and in EEA countries.

As reported by the Council of the EU, the proposed rules are to improve the strategic autonomy of the European economic and financial sector. They will help reduce the excessive reliance in instant payments on financial institutions and financial infrastructure from third countries. The improved possibility for mobilising cash flows will bring benefits to citizens and businesses and will allow for innovative added-value services.

According to the new rules, instant payment providers will have to verify the payee’s IBAN and name in order to warn the payer about potential mistakes or fraud prior to the transaction. 

More details can be found here:

https://www.consilium.europa.eu/en/press/press-releases/2023/11/07/instant-payments-council-and-parliament-reach-provisional-agreement/