cyber security

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In a year-end change of course, the SEC identified the minimum steps that broker-dealers must take when acting as custodians of digital asset securities.

By Stephen P. Wink, Naim Culhaci, Shaun Musuka, and Deric Behar

On December 23, 2020, the US Securities and Exchange Commission (SEC) staff issued a statement (Custody of Digital Asset Securities by Special Purpose Broker-Dealers) (the Statement) outlining its position on how broker-dealers must operate when acting as custodians of digital asset securities[i] in order to avoid enforcement action. The SEC’s Statement, which will be in effect for five years, is intended to encourage innovation while providing both industry participants and the SEC the opportunity to develop best practices with respect to the custody of digital asset securities.

Elisabeth Stheeman of the Financial Policy Committee outlined the new frameworks for building operational resilience against cyber risks and protection of payment chains.

By Brett Carr and Stuart Davis

On 9 September 2020, Elisabeth Stheeman, an External Member of the Financial Policy Committee (FPC) for the Bank of England (BoE) delivered a speech entitled, “The Financial ‘Plumbing’ Committee: from Plumbing to Policy” outlining the changes that financial services firms can expect in two priority areas — cyber and payments — in order to build operational resilience of the financial system.

An ECON draft report on digital finance recommends legislative action in relation to cryptoassets and cyber resilience and a framework for digital onboarding.

By Stuart Davis, Sam Maxson, and Anna Lewis-Martinez

On 4 June 2020, the European Parliament’s Economic and Monetary Affairs Committee (ECON) published a draft report setting out its recommendations to the European Commission on digital finance, including emerging risks in cryptoassets and regulatory and supervisory challenges in the area of financial services, institutions, and markets.

The aim of the draft report is to address the main areas that demand a pan-European regulatory response to digital finance. Three priority areas are highlighted for consideration for legislative action: cryptoassets, cyber resilience, and data. These areas are noted as key to the future development of digital finance in the EU.

By Andrew C. Moyle, Grace Erskine, and Charlotte Collins

As leading global financial and FinTech centres, the UK and Singapore will benefit from strengthening their cybersecurity alliance.

On 13 June 2019, the Bank of England, the Financial Conduct Authority, and the Monetary Authority of Singapore announced that they will be working together to strengthen cybersecurity in their countries’ financial sectors.

The regulators have characterised the aims of this new collaboration as “identifying effective ways to share information and exploring potential for staff exchanges”.

All three regulators have identified cybercrime as an increasing global problem. Speaking about the new initiative, Mark Carney, Governor of the Bank of England, said, “The average cost of cybercrime for financial services companies globally has increased by more than 40% over the past three years. Cyber risk is not constrained by geographic boundaries, making international cooperation essential to address this growing threat”.