Latham lawyers explore the latest insurtech trends and regulatory developments impacting the sector in Europe and Asia.
Disruptive technology is revolutionizing insurance, enabling insurers to achieve growth by leveraging big data and creating innovative solutions to enhance customers’ digital experience. We are pleased to launch Insurtech Insights, a series of webcasts to discuss the most recent trends in the insurtech space and how to navigate regulatory developments.
Andrew Bailey outlined what payments market participants can expect from regulators seeking to address financial stability risk in the world of payments, including as part of the rise and adoption of global stablecoins.
By Brett Carr and Stuart Davis
On 3 September 2020, the Governor of the Bank of England (BoE) Andrew Bailey delivered a speech “Reinventing the Wheel (with more automation)”, in which he outlined regulatory changes that payments market participants can expect, including as part of the global regulatory response to stablecoins.
The long-awaited guidance clarifies the application of the “actual delivery” exception to leveraged virtual currency transactions with retail purchasers.
By Yvette D. Valdez, J. Ashley Weeks, and Deric Behar
Earlier this year, the US Commodity Futures Trading Commission (CFTC) approved final interpretive guidance (Guidance) concerning retail commodity transactions involving certain digital assets. The Guidance clarifies the CFTC’s views regarding the “actual delivery” exception to Section 2(c)(2)(D) of the Commodity Exchange Act (CEA) in the context of virtual currencies, and is intended for exchanges, trading platforms, custodians, and other market participants transacting in virtual currencies that are considered commodities (such as Bitcoin and Ether) and traded via leverage, margin, or other financing provided by the seller, trading platform, or other third party.
The report encourages the G20 to consider a broad set of supervisory principles when evaluating global stablecoin arrangements.
By Todd Beauchamp, Stuart Davis, Christian F. McDermott, Yvette D. Valdez, Stephen P. Wink, Simon Hawkins, and Deric Behar
On April 14, 2020, the G20’s Financial Stability Board (FSB) published a consultation on the regulation, supervision, and oversight of privately issued global stablecoins (Addressing the Regulatory, Supervisory and Oversight Challenges Raised by “Global Stablecoin” Arrangements). The consultation includes 10 high-level recommendations that promote a multilateral approach to oversight defined by flexibility, consistency, coordination, and information-sharing between jurisdictions to keep apace of the changing nature of the risks posed by global stablecoins. While acknowledging the potential financial service benefits of global stablecoins, the FSB highlights some of the downstream impacts global stablecoins may have on national economies, across borders, and on the global financial system.
The paper discusses supervision and regulatory issues of cryptocurrencies, and finds that a central bank digital currency in the EU is not (yet) warranted.
By Max von Cube
In May, the European Central Bank’s Crypto-Assets Task Force published a paper on cryptocurrencies such as Bitcoin, Ether, and Ripple (referred to as narrowly defined “crypto-assets”). The paper, titled “Crypto-Assets: Implications for financial stability, monetary policy, and payments and market infrastructures,” follows similar recent publications by the European Banking Authority (EBA)[i] and the European Securities and Markets Authority (ESMA).[ii]
After examining cryptocurrency markets and tracing their linkage to the financial system and the real economy, the authors of the paper found that cryptocurrencies currently do not pose a material risk to financial stability. Further, the authors currently see no direct implications of cryptocurrencies for monetary policy.
Both the FCA and the PRA have written to firms to warn about certain risks associated with exposures to crypto-assets, and to advise firms of the measures they should consider implementing to mitigate such risks.
By Stuart Davis and Charlotte Collins
The FCA and the PRA have each written a “Dear CEO” letter to firms, to warn about the risks associated with exposure to crypto-assets. The letters reflect each regulator’s concerns, according to their regulatory remit, and provide examples of practical measures that firms should be putting in place.
These letters come at a time when both the use and regulatory scrutiny of crypto-assets is increasing, with the FCA recently revealing in a response to a Freedom of Information Act request that it is currently investigating 24 crypto firms.
The Strategy emphasises the UK government’s continued push to create a world-leading FinTech sector.
By Stuart Davis, Charlotte Collins and Sam Wong
At the second International Fintech Conference held on 22 March 2018, Philip Hammond, Chancellor of the Exchequer, announced the launch of the UK’s first Fintech Sector Strategy.
The Strategy includes the following key measures:
— consisting of HM Treasury, the Bank of England, and the Financial Conduct Authority (FCA) — will be set up to help the UK manage risks relating to cryptoassets and to harness potential benefits of the underlying technology.