FinTech Global FS Regulatory Round-up - w/e 25 April 2025

ICYMI

• High Court rules in favour of APP fraud victims in 'derivative' action against PSP for breach of so-called Quincecare duty 

Global

BIS: Project Meridian FX – exploring synchronised settlement in FX

The Bank for International Settlements (BIS) Innovation Hub has published the findings of Project Meridian FX, a joint project between the BIS Innovation Hub and several central banks that explored synchronising foreign exchange (FX) transactions. The project demonstrated that wholesale payment infrastructures, such as real-time gross settlement (RTGS) systems, can be interoperable via new technologies for FX transactions. [24 Apr 2025]  #Payments

BIS: Project Promissa – blockchain for multilateral development

The BIS Innovation Hub has published a final report on a project that explored how to manage the financial commitments of member countries to multilateral development banks (MDBs) more efficiently. Project Promissa developed a proof-of-concept (PoC) platform for tokenised promissory notes, which could replace the current paper-based notes and automate many manual processes.

The experiment found that the PoC is technically feasible and could provide substantial cost savings for MDBs, central banks, and Ministries of Finance. [23 Apr 2025]  #Crypto 

UK

FCA speech on growth and innovation

The FCA has published a speech by its Chief Data, Information and Intelligence Officer Jessica Rusu at TheCityUK International Conference 2025. Ms Rusu spoke about how the FCA is supporting growth and innovation through initiatives like the Regulatory Sandbox and the AI Lab. She also discussed the regulator's work in helping shape the future of financial services while working closely with Government and industry to realise the benefits of open finance. [25 Apr 2025]  #AI #Sandbox

FCA: AI Sprint

The FCA has published a summary of the feedback received from a two-day AI Sprint that it hosted in January 2025 to discuss the opportunities and challenges of AI in financial services. 115 participants took part from across industry, academia, regulators, technology providers and consumer representatives. They discussed how AI may develop in financial services over the next 5 years, and the FCA’s role enabling firms to embrace the benefits of AI while also managing the risks.

Participants' discussions and suggestions highlighted four common themes: regulatory clarity, trust and risk awareness, collaboration and coordination, and safe AI innovation through sandboxing.

In terms of next steps, the FCA will focus on:

• the need for a safe space to innovate – it will be launching the Supercharged Sandbox to support the testing and validation of AI solutions;
• any areas of uncertainty – considering whether there are areas of uncertainty where regulation could be restricting safe and responsible AI adoption;
• international engagement – influencing the international standard-setting bodies' work on AI to ensure the FCA can support safe and responsible adoption in the UK;
• collaboration opportunities – engaging bilaterally with other regulators to explore cross-cutting considerations as well as collaboration opportunities on specific themes; and
• communication and continued engagement – providing clear communication about its approach to AI and continuing engagement with stakeholders through the AI Lab.

A blog post by the FCA's Head of innovation services on the key takeaways from the event has also been published. [23 Apr 2025]  #AI #Sandbox

TSC: Oral evidence on finfluencers

The Treasury Select Committee (TSC) has announced that it will be holding an oral evidence session as part of the inquiry into finfluencers on 30 April 2025. The TSC will be hearing from Steve Smart, FCA Joint Executive Director of Enforcement and Market Oversight, and Lucy Castledine, FCA Director of Consumer Investments. [23 Apr 2025]  #SocialMedia #Finfluencer

Australia

Full Federal Court finds that Block Earner did not engage in unlicensed conduct, holding that a product allowing customers to 'loan' cryptocurrency in return for interest not a 'financial product'

The Full Court of the Federal Court of Australia has found in favour of a cross-appeal brought by Block Earner, a digital-asset service provider, against a decision of the Federal Court of Australia (primary decision). The primary decision had held that Block Earner engaged in unlicensed conduct by offering its “Earner product”, which allowed customers to “loan” specified cryptocurrency in return for interest paid at a fixed rate, without an Australian financial services license (AFSL).

The Full Court found that, contrary to the arguments of ASIC, Block Earner had not engaged in unlicensed conduct as the Earner product was not in fact a 'financial product'.

Primary decision:

ASIC first commenced proceedings against Block Earner in November 2022, arguing that it had engaged in unlicensed financial services conduct when offering its digital-asset-related Earner product. It was common ground between the parties that if the Earner product constituted a financial product within the meaning of the Corporations Act 2001 (Cth) (Act), then Block Earner had engaged in unlicensed conduct by carrying on a financial services business without holding an AFSL.

The primary judge accepted ASIC’s case that the Earner product was a financial product because it involved Block Earner: (i) operating a managed investment scheme; and (ii) offering a financial investment scheme. However, despite making declarations of contravention against Block Earner, the primary judge ordered that, in the circumstances, Block Earner should be relieved from liability to pay a penalty.

Decision of the Full Court:

ASIC appealed from the decision of the primary judge, contending that a penalty should have been imposed. Block Earner cross-appealed, arguing that the Earner product was not a financial product for the purposes of the Act.

The Full Court dismissed ASIC’s appeal and allowed Block Earner’s cross-appeal. The Full Court concluded that the Earner product was not a financial product as it was neither a managed investment scheme nor a facility to make a financial investment. The Full Court also rejected an alternative argument by ASIC that the Earner product was a financial product in the form of a derivative. Accordingly, the declarations of contravention against Block Earner were set aside, and ASIC was ordered to pay the costs of the proceedings.

ASIC is considering the decision. [22 Apr 2025]  #Crypto

Hong Kong

SFC CEO delivers speech on fostering future-ready capital markets in a new era of uncertainty

Ms Julia Leung (the SFC's CEO) gave keynote remarks on 24 April 2025 at the OSC Dialogue organised by the Ontario Securities Commission.

Ms Leung noted that with the escalating trade war, the biggest question for capital market regulators is how one can ensure the resilience and robustness of the markets and prepare financial institutions for a future of uncertainty.  She emphasised the importance of harnessing the disruptive forces – such as geopolitical tensions, new technologies including blockchain and generative artificial intelligence, and climate risk – into positive agents of change to drive market progress.

Ms Leung discussed the SFC's strategies to harness the changing tides to ensure the resilience and competitiveness of the markets, including harnessing innovative technology to future-proof financial markets. One of the SFC's core initiatives is setting out a comprehensive, competitive regulatory framework for Hong Kong’s virtual asset market focused on investor protection. The recently-published 'ASPIRe' roadmap aims to enhance the security, innovation and growth of our market under a five-pillar framework (see our previous update).  [25 Apr 2025] #AI #Crypto

Singapore

MAS responds to letter on extending cybersecurity to vendors

MAS has published its response to a forum letter calling for cybersecurity standards to be extended beyond an organisation’s own systems to include its vendors. MAS expressed agreement with the letter and highlighted its expectation that all financial institutions must put in place stringent controls to protect any customer information that they disclose to their third-party vendors. Firms are also expected to regularly review and affirm that the controls of their vendors are adequate to safeguard the confidentiality of customer information.  [21 Apr 2025]  #Cyber

MAS: Experts panel proposes ways to enhance technology resilience and tackle emerging threats

MAS has published the key insights and recommendations from a Cyber and Technology Resilience Experts (CTREX) Panel meeting convened to discuss a range of topics, including technology resilience, third-party risks, quantum security and digital financial scams. Recommendations of the Panel include:

• adopting a service-centric approach to strengthen operational resilience;
• addressing third-party and open-source software risks in the IT supply chain;
• preparing the industry for a post-quantum security landscape; and
• enhancing anti-scam measures.  [17 Apr 2025] #Cyber

US

FDIC and Fed withdraw statements on crypto

The Federal Deposit Insurance Corporation (FDIC) and the Board of Governors of the Federal Reserve System (Fed) have withdrawn two joint statements regarding banking organizations’ cryptoasset-related activities. This action is intended to provide clarity that banking organizations may engage in permissible cryptoasset activities and provide products and services to persons and firms engaged in cryptoasset related activities, consistent with safety and soundness and applicable laws and regulations.

The withdrawn joint statements (issued in 2023) addressed cryptoasset risks and liquidity risks to banking organizations resulting from cryptoasset market vulnerabilities.  [24 Apr 2025]  #Crypto

FINRA cybersecurity advisory – fast flux-enable malicious activity

The Financial Industry Regulatory Authority (FINRA) has issued an advisory to all FINRA member firms which highlights that the Cybersecurity and Infrastructure Security Agency (CISA), National Security Agency (NSA), Federal Bureau of Investigation (FBI), Australian Signals Directorate’s Australian Cyber Security Centre (ASD’s ACSC), Canadian Centre for Cyber Security (CCCS) and New Zealand National Cyber Security Centre (NCSC-NZ) issued a joint cybersecurity advisory about the ongoing threat of a technique – "fast flux" – which is used by threat actors to avoid network defenders detecting the required communications of malware.

While the joint alert does not cite any specific incidents associated with specific threat actors or indicate a precise threat to the financial services industry, FINRA has issued its own advisory to alert members to the joint alert and to the effective practices it outlines that all organizations can implement to defend against fast flux-enabled malicious activity.  [18 Apr 2025]  #Cyber