Hogan Lovells 2024 Election Impact and Congressional Outlook Report
15 November 2024
Key developments of interest over the last month include: Queen's Speech 2022 announces forthcoming Financial Services and Markets Bill; European Commission consultations and calls for evidence on PSD2 review and open finance; and Australian Prudential Risk Authority sets 2025 as a deadline for cryptocurrency regulation.
This month we are also pleased to announce the launch of our Cross-Border Regulatory Guide for Retail Banking and Fintech (Europe) on Engage. The Guide provides overviews of the regulatory regimes relevant to retail banking and fintech in key European jurisdictions and covers topics such as fintech, consumer lending, payment services, anti-money laundering, data protection and cybersecurity.
For previous editions of the Global Payments Newsletter, please visit our Financial Services practice page.
STOP PRESS: On 25 May 2022 the UK Financial Services Regulatory Initiatives Forum published the fifth edition of its Regulatory Initiatives Grid, providing detail on the timing of initiatives over a 24-month horizon. The Forum’s members are the Bank of England (including the PRA), the FCA, the Payment Systems Regulator, the Competition and Markets Authority, the Financial Reporting Council, The Pensions Regulator and the Information Commissioner’s Office. HM Treasury attends as an observer member. For more on this development, take a look at this Engage article by members of Hogan Lovells' London office.
Among the legislation announced in the Queen's Speech on 10 May 2022 was a Financial Services and Markets Bill. According to a government press release, the Bill delivers on the ambitious vision for the financial services sector set out by the Chancellor of the Exchequer at Mansion House last year. It builds on the Financial Services Act 2021, which was the first step in amending the UK’s regulatory regime outside of the EU. The main elements of the Bill are:
More details will be available when the Bill is formally introduced to Parliament.
Other proposed legislation announced in the Queen's Speech included:
The Background Briefing Notes on the proposed legislation announced in the Queen's Speech have also been published.
On 10 May 2022, the European Commission launched a public consultation on PSD2 and open finance, aiming to assess the effectiveness, efficiency, costs and benefits, coherence, and EU added value of PSD2. Calls for evidence on related impact assessments for potential legislative initiatives have also been published, as well as targeted consultations on the PSD2 review and on open finance.
Consultation on PSD2 review and open finance
The public consultation, which is in questionnaire format, is specifically designed for respondents that have minimum technical knowledge about the payment industry or about data access and reuse in the context of open finance. The results will determine if the PSD2 objectives have been achieved or if changes are needed to ensure EU retail payment rules remain fit for purpose and future-proof (and if so, the type and scope of changes), with a view to the Commission's ongoing work on the open finance framework which is part of the Data Strategy for Europe.
The deadline for comments is 2 August 2022.
Calls for evidence on impact assessments for PSD2 review and open finance
Accompanying the public consultation are:
The deadline for comments on both of the calls for evidence is 7 June 2022.
Targeted consultation on PSD2 review
The Commission's targeted consultation paper on the PSD2 review focuses on technical issues and the Commission is looking in particular for responses from professional stakeholders such as payment services and technical services providers. Part 1 covers general questions concerning PSD2's main objectives and specific objectives grouped by theme, while Part 2 covers questions on whether the specific measures and procedures of PSD2 remain adequate, including questions concerning possible changes or amendments to the Directive.
The deadline for comments is 5 July 2022. If necessary, the Commission may publish another targeted consultation, eg to consider specific policy options and impacts in more detail.
Targeted consultation on open finance framework and data sharing in the financial sector
The Commission's targeted consultation paper on an open finance framework (announced in the Capital Markets Union communication of November 2021) and data sharing in the financial sector looks to gather evidence and stakeholder views on the current status and further development of open finance in the EU and effective customer protection. Customers of financial services firms (consumers and corporate customers), financial institutions and other firms that either hold data or intend to use it are specific targets of the consultation.
The deadline for comments is 5 July 2022.
For more on the above developments, take a look at this Engage article by members of Hogan Lovells' London office.
On 21 April 2022, Australia's main financial regulator, the Prudential Risk Authority, or APRA, published a letter announcing a 2025 target for implementing regulations governing cryptocurrencies.
The APRA is developing the longer-term prudential framework for cryptoassets and related activities in Australia in consultation with other regulators internationally, to ensure consistency in approach.
APRA's planned activities are as follows:
On 10 May 2022, HM Treasury published a policy paper setting out how the government and the Payment Systems Regulator (PSR) intend to improve authorised push payment (APP) scam reimbursement. In this regard, the government will:
On 28 April 2022, the Lending Standards Board (LSB) updated the Contingent Reimbursement Model (CRM) Code to further strengthen protection against authorised push payment (APP) scams. An accompanying press release states that the three most significant updates to the CRM Code will:
Another significant update comes via the activation of the Confirmation of Payee requirements for all signatory firms.
On 28 April 2022, the Treasury Committee published responses to its report of 2 February 2022 on fraud, scams and economic crime.
The government has rejected the call for the creation of a single law enforcement agency dedicated to the challenge of combatting economic crime and has confirmed that it intends
to create a second Economic Crime Plan due for publication later this year, as well as a 10-year Fraud Strategy. The government has also confirmed that the Corporate Transparency and Register Reform Bill will be brought forward in the third session of Parliament. The Bill will include reform of Companies House, reforms to prevent abuse of limited partnerships, new statutory powers to seize and recover illicit cryptoassets and reform via a forthcoming Economic Crime Bill.
As well as updates to the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs) due later in 2022, there will be a further and broader review of the MLRs aimed at shaping the direction of the UK's anti-money laundering regime for the future.
While not ruling it out, the government has not committed to imposing an obligation on online companies to provide compensation to the victims of online fraud.
The government has also confirmed that the barrier in the Payment Services Regulations 2017 preventing the Payment Systems Regulator from using its existing regulatory powers to introduce mandatory authorised push payment scam reimbursement for scams which occur over Faster Payments would be addressed by bringing forward the necessary legislation.
On 29 April 2022, the Competition and Markets Authority (CMA) published a letter from the Chief Executive of the Digital Regulation Cooperation Forum (DRCF) responding to a letter from the Secretary of State, Rt Hon Nadine Dorries, in which she set out the government's priorities for the digital regulatory landscape and cross-cutting policy areas relevant to the DRCF's work.
The letter notes, in particular, that the DRCF:
On 28 April 2022, the Digital Regulation Co-operation Forum (DRCF) published its annual report on its first year of operation and its workplan for 2022/23. It also published two papers on algorithms, in relation to which it issued a call for comments.
On 22 April 2022, the Council of the EU and the European Parliament reached provisional political agreement on the Digital Services Act (DSA), which was originally introduced by the European Commission in December 2020.
The DSA imposes obligations on various online intermediary service providers such as to:
The obligations, aimed at ensuring a safer and more open digital space for users and a level playing field for companies, increase cumulatively depending on the breadth of an intermediary's activities.
Once the DSA's text is finalised at a technical level, it will need to be formally adopted by both the European Parliament and the Council.
On 29 April 2022, the Bank of England (BoE) published a consultation paper setting out proposals for a new framework for the Real-Time Gross Settlement (RTGS) and CHAPS tariffs, as well as a consultation paper on the next stage of the roadmap for the Real-Time Gross Settlement (RTGS) service beyond 2024.
The BoE has decided to review the RTGS and CHAPS tariff framework to ensure it remains fit for purpose going forward in light of the changes to the payments industry and the renewal of RTGS. It explains that the costs of delivering the new systems are not yet final, but the consultation is intended to provide the industry with an indication of future costs now to support their own planning.
Alongside this consultation, the BoE is consulting on the next stage of the roadmap for the RTGS service beyond 2024. The proposals included in that consultation are not included in the tariff framework consultation. The BoE will consider how to recover the costs for those proposals following the conclusion on the scope and priorities of the roadmap.
The BoE seeks the views of existing and potential new RTGS service users on its proposals for the features for the next stage of the RTGS roadmap. These cover: (i) new cost-effective ways to connect based on open standards and compatibility with a wide range of technologies; (ii) innovative and flexible services to address the changing needs of users; and (iii) world-class resilience.
The deadline for responses to both consultations is 30 June 2022.
On 3 May 2022, the Lending Standards Board (LSB) published its business plan and budget for 2022/23.
In the plan, the LSB sets out its strategic priorities and provides further detail on the activities it intends to undertake during 2022/23, together with a summary timeline. Planned activities include:
On 26 April 2022, the FCA published a new webpage on its "early and high growth oversight" initiative.
The FCA recognises that firms can face challenges in meeting their regulatory obligations in the first few years after authorisation. In response to this, it has launched the initiative with a view to providing enhanced supervision for firms as they get used to their regulatory status and to support firms in understanding their obligations to ensure they can meet the standards the FCA expects as they grow.
The FCA piloted the initiative between October 2021 and March 2022 with 32 newly authorised firms across a range of sectors. Based on the FCA's discussions with firms in the pilot, it has identified the following insights that may be helpful for other firms going through the authorisation process:
On 26 April 2022, HM Treasury published a policy statement on protecting the UK's wholesale cash infrastructure.
It explains that the UK needs a sustainable and resilient wholesale cash system to support continued access to cash. While the industry is expected to transition to a smaller overall network over time, if this happens in a disorderly way it could pose a potentially significant risk to the wholesale cash infrastructure's effectiveness and sustainability, and therefore its ability to supply cash to the UK's retail network.
Given the need to manage these risks, the government intends to provide the Bank of England (BoE) with powers to oversee the wholesale cash distribution system to ensure it remains resilient and sustainable and can continue to effectively support access to cash. It is creating a two-pronged oversight regime:
The government intends to legislate for the new regime when Parliamentary time allows and the BoE will subsequently consult on the development of its regulatory approach.
On 20 April 2022, the PRA published its Business Plan for 2022/23, which sets out its strategy and work plan for the coming year as well as an overview of the PRA's 2022/23 budget.
The PRA's strategic priorities for 2022/23 are:
On 10 May 2022, the Payment Systems Regulator (PSR) published the summary report (dated April 2022) of the independent PSR Panel's digital payments initiative.
The Panel identified the following four high-level areas that need to be tackled to address the drivers of cash reliance and enable greater take-up of digital payments:
In each of these areas, the Panel has set out recommendations for the PSR, some of which are specific technical recommendations, to encourage (greater) use of digital payments. It expects the PSR to take these recommendations into account in its work programme and to undertake appropriate analysis and validation of the Panel's proposals.
On 5 May 2022, the FCA published a speech given by Nikhil Rathi, FCA Chief Executive, on how to capitalise on innovation. Points of interest in the speech include the following:
On 5 May 2022, the European Commission published a speech given by Executive Vice-President Vestager at the International Competition Network Annual Conference.
In the speech, Vestager announced that the entry into force of the Digital Markets Act (DMA) has been postponed from later this year (as previously anticipated) to early 2023. The delay is a result of the extended preparation process; Vestager explained new structures need to be set up in the Commission, resources need to be pooled, staff need to be hired and IT systems still need to be set up.
On 6 May 2022, the Department of Digital, Culture, Media and Sport and the Department for Business, Energy and Industrial Strategy published the government's response to their July 2021 consultation on a new pro-competition regime for digital markets and the establishment of the Digital Markets Unit (DMU). Regarding the role of the DMU:
Legislation will be brought forward to implement the reforms when Parliamentary time allows.
On 27 April 2022, the EBA published a statement on financial inclusion in the context of the conflict in Ukraine.
In the statement, among other things the EBA:
The EBA commits to continue to monitor the situation and work with competent authorities and the private sector as necessary to share best practices, set common regulatory expectations and facilitate the development of a common approach across EU member states.
Also, on 26 April 2022 the ECB published FAQs on its supervisory approach in the light of the conflict in Ukraine. Topics covered by the FAQs include banks' exposures to Russia and Ukraine.
On 4 May 2022, the EBA published a final report setting out its technical advice to the European Commission on non-bank lending, in response to a February 2021 call for advice on digital finance and related issues.
The EBA has analysed market developments and the risks and challenges posed by the increased provision of lending by non-bank entities. Although the amount of non-bank lending in the EU remains very small compared to credit provided by banks, Fintech activity has been increasing steadily over the last few years. The trends observed outside the EU also show that BigTechs and other non-traditional operators have already developed, and successfully rolled out, business models for lending. The same applies to lending in the form of cryptoassets, which has seen a rapid increase since 2020 and has contributed to the extension and reach of non-bank lending activities in alternative means other than conventional fiat funds.
In the report, the EBA identifies the specific risks related to the provision of credit by non-bank lenders and sets out proposals to address them. In particular, it highlights the importance of:
On 11 May 2022, the European Commission published a legislative proposal that it has adopted for a Directive concerning financial services contracts concluded at a distance which would repeal the current Distance Marketing Directive (DMD) and transfer the framework for consumer protections relating to financial services distance contracts to the Consumer Rights Directive (CRD).
The proposed Directive would aim to modernise the existing DMD framework, including requiring traders to: provide an email address in pre-contractual information and supply pre-contractual information at least a day before consumers are bound by any distance contract; allow consumers to use a withdrawal button where distance contracts are concluded by electronic means; provide adequate explanations on proposed financial services contracts (and if a trader uses online tools for this purpose consumers will have a right to request and obtain human intervention). The application of certain rules in the CRD, including on additional payments and enforcement and penalties, will also be extended to financial services distance contracts.
The legislative proposal will now be considered by the Council of the EU and the European Parliament.
On 28 April 2022, the PRA published a speech by David Bailey, PRA Executive Director, UK Deposit Takers Supervision, on the next steps on the PRA’s supervisory roadmap for operational resilience.
Mr Bailey identified the following key themes from the PRA's review of the board-approved lists of important business services (IBS) and impact tolerances that it has received:
On 10 May 2022, the Council of the EU and the European Parliament reached a provisional political agreement on the proposed Regulation on digital operational resilience for the financial sector (DORA).
The Council's related press release highlights key aspects of the agreement, which include:
The European Parliament also published a separate press release on the agreement.
The provisional agreement is subject to approval by the Council and the European Parliament before going through the formal adoption procedure. The agreed revised text of the legislative proposal has not yet been published.
The new rules will apply 24 months after they enter into force.
On 2 May 2022, the Federal Reserve announced it had begun the testing phase for the FedNow Service pilot, including the onboarding of participating organisations, in preparation for the launch of its FedNow instant payments program in 2023.
More than 120 organisations are participating in the pilot. Participants in the testing phase satisfied criteria surrounding instant payments readiness and expressed a desire to participate in early testing, the Federal Reserve said.
The Federal Reserve announced the FedNow pilot, which includes three phases (advisory, testing and closed-loop production), in October 2020.
Participating organisations in the test phase will continue onboarding in the coming months and establish connectivity and perform technical and operational tasks that will lay the groundwork for full-scale, end-to-end testing later this year.
On 19 April 2022, the International Monetary Fund (IMF) published a report on global financial stability.
The report notes that the accelerated "cryptoization" (i.e. the expansion of the crypto‑ecosystem) in emerging market economies is a key area of concern. The IMF notes this expansion is partly due to a structural shift towards cryptoassets as a means of payment and/or store of value, and partly due to more temporary drivers, such as speculative interest during the pandemic.
The IMF also states that regulation is not keeping pace with innovative technologies such as decentralised finance (DeFi), and recommends that regulators concentrate on related aspects of the crypto-ecosystem such as stablecoin issuers and centralised exchanges.
On 28 April 2022, the ECB launched a call for expressions of interest for payment service providers, banks and other relevant companies to join an exercise to develop prototype user interfaces for a future digital euro payments system.
Participants will be asked to collaborate with the ECB on the development of prototypes that address specific use cases for the payment process.
Responses were due by 20 May 2022.
On 27 April 2022, it was reported that the Central African Republic had voted unanimously to adopt Bitcoin as legal tender, becoming the first country in Africa and only the second in the world to do so. A government statement explained that a Bill governing the use of cryptocurrency had been adopted unanimously by Parliament.
On 27 April 2022, the Hong Kong Monetary Authority (HKMA) published a discussion paper titled "e-HKD: A policy and design perspective", inviting views from the public and the industry on key policy and design issues for introducing a retail central bank digital currency (CBDC).
The HKMA is inviting views on the potential benefits and challenges of a CBDC, design considerations such as the issuance mechanism, interoperability with other payment systems, privacy and data protection and legal considerations, as well as use cases.
While Hong Kong has still not made a final decision on an e-HKD, it has agreed to a pilot programme for China's digital yuan.
Responses to the discussion paper were due by 27 May 2022.
On 21 April 2022, the Bahamian government published a white paper on the future of digital assets in The Bahamas, setting out the government's vision and framework for the development of the Bahamian digital asset policy from 2022 to 2026.
The main objectives of the white paper include:
Key initiatives include permitting citizens to pay their taxes using digital assets and the promotion of the country's CBDC, the sand dollar.
On 26 April 2022, a new Bill was approved by the Brazilian Senate which, if enacted, would introduce a regulatory framework for virtual assets and their service providers. It will now need to be approved by the Chamber of Deputies before it can be signed into law by the Brazilian President.
Among other things, the Bill would appoint a regulatory body to supervise virtual asset service providers, as well as amend the penal code to introduce penalties for fraud using virtual assets.
On 26 April 2022, the Bangko Sentral ng Pilipinas (BSP) announced it is launching a pilot project, Project CBDCPh, which will test the use of a wholesale CBDC for large-value financial transactions.
The BSP is exploring the potential use of wholesale CBDCs in areas where these can yield the greatest value-adding benefits to the payment system. Findings from the pilot will feed into constructing the BSP's medium to long-term roadmap for more advanced wholesale CBDC projects that will further strengthen the Philippine payment system.
On 26 April 2022, the FCA published a speech given by Nikhil Rathi, FCA Chief Executive, on the FCA's view of critical issues in financial regulation.
Mr Rathi sets out the challenges and opportunities confronting the FCA and how it plans to meet them by focussing on the problems in front of it rather than addressing issues by asset class or sector.
Among the other points of interest in the speech are Mr Rathi's comments on cryptoassets. The FCA has so far registered 33 cryptoasset firms under the anti-money laundering (AML) and counter-terrorist financing (CTF) regime for certain cryptoasset businesses. Mr Rathi explains that the regulator worked with many firms to help improve their capabilities instead of just rejecting or approving applications with no feedback or advice, and its rejection of those that did not meet the standards should not be interpreted as anti-innovation. Mr Rathi also explains that a key issue that needs wider consideration by policymakers is the risk that cryptoasset businesses whose applications for registration are rejected can still service UK customers from offshore. He says that it is encouraging that partner agencies in other jurisdictions follow the FCA's lead when it rejects firms' registrations, but it is not enough to rely on the FCA's global influence to achieve this.
On 12 May 2022, Pablo Hernández de Cos, chair of the Basel Committee on Banking Supervision (BCBS) and governor of the Bank of Spain, delivered a speech in which he warned that fast-paced developments in decentralised finance (DeFi) and cryptoassets necessitate a proactive and forward-looking regulatory and supervisory approach. Additionally, as cryptoassets and DeFi still represent less than 1% of total global financial assets and banks' exposures are relatively limited, an appropriate response is to bring these areas within the relevant regulatory perimeter.
Hernández de Cos flagged the cross-border nature of cryptoassets and how effective collaboration across global standard-setting bodies will be required to answer some policy questions regarding taxation, anti-money laundering, compliance and data privacy.
On 23 March 2022, changes to the rules on the Mexican electronic transfer system known as SPEI were published. The amendments are aimed at:
The timing for these provisions to enter into effect is complex but financial institutions, fintech companies and other entities connected to the SPEI will be required to implement changes and become compliant shortly.
See this Engage article by Hogan Lovells' Mexico team for more on this development.
On 22 April 2022, the FCA published its multi-firm review of financial crime controls at challenger banks. The FCA focused its review on challenger banks that are relatively new to the market and offer a quick and easy application process. The sample selection included six challenger retail banks and covered over eight million customers.
Although the FCA found some evidence of good practice, it found more needs to be done by the challenger banks sector. The FCA specifically notes:
For more on this development, take a look at this Engage article by members of Hogan Lovells' London office.
On 11 May 2022, the Wolfsberg Group published a document containing frequently asked questions (FAQs) on how negative news screening (NNS) can enhance financial institutions' awareness of potential financial crime risk posed by both existing and prospective customers.
The Group recognises that there is no universally agreed and accepted definition of negative news. For the purposes of the FAQs, the term has been broadly defined as "information available in the public domain that financial institutions would consider relevant to the management of financial crime risk".
The FAQs seek to identify relevant factors that financial institutions may find useful in setting out NNS standards, including:
They also provide guidance on assessing the reliability of NNS sources and the materiality of NNS results, as well as the configuration of screening systems, alert management and associated governance.
See this Engage article by members of Hogan Lovells' London office for more on this development.
On 19 April 2022, the Financial Action Task Force (FATF) published a report on the state of the effectiveness of its anti-money laundering and counter terrorist financing (AML/CTF) standards.
Overall, the report finds that countries have made huge progress in improving technical compliance by establishing and enacting a broad range of laws and regulations to better
tackle money laundering, terrorist and proliferation financing. This has created a firm legislative basis for national authorities to "follow the money" that fuels crime and terrorism. In terms of laws and regulations, the report notes 76% of countries have now satisfactorily implemented the FATF's 40 Recommendations.
However, many countries still face substantial challenges in taking effective action commensurate to the risks they face. This includes difficulties in investigating and prosecuting high-profile cross-border cases and preventing anonymous shell companies and trusts being used for illicit purposes.
On 21 April 2022, the Council of the EU published a note (8293/22) 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 information accompanying transfers of funds and certain cryptoassets (2021/0241(COD)).
The Council agreed its negotiating mandate in December 2021 and the European Parliament agreed its negotiating mandate in April 2022. The Commission adopted the proposed Regulation, which is intended to revise and recast the revised Wire Transfer Regulation ((EU) 2015/847), in July 2021 as part of a package of measures to reform the EU anti-money laundering and counter-terrorist financing regime.
On 12 May 2022, the Bank for International Settlements' (BIS) Committee on Payments and Market Infrastructures (CPMI) published a final report on extending and aligning payment system operating hours for cross-border payments, focusing on the operating hours of real-time gross settlement (RTGS) systems, which are considered key to enhancing cross-border payments. This is part of the G20's cross-border payments programme.
In November 2021, the CPMI consulted on three potential scenarios (or "end states") for extending RTGS system operating hours and associated operational, risk and policy considerations, namely:
The analysis presented in the report is based on a survey of 82 jurisdictions conducted by the CPMI. This identified 62 RTGS systems and provided information about their current operating hours. The analysis has also been informed by consultation responses and discussions with several central banks that have expanded their RTGS operating hours to 24/7 or near 24/7. The CPMI:
On 20 April 2022, the ECB published a Guideline on a new generation trans-European automated real-time gross settlement express transfer system (TARGET) and repealing Guideline ECB/2012/27. It also published a Decision ECB/2022/22 concerning the terms and conditions of TARGET-ECB and repealing Decision ECB/2007/7.
From 21 November 2022, the new generation TARGET will replace the current trans‑European automated real-time gross settlement express transfer system (TARGET2) under measures to consolidate TARGET2 and TARGET2-Securities (T2S) (the T2 and T2S consolidation project). Guideline ECB/2012/27, which governs TARGET2, is therefore repealed and replaced by Guideline ECB/2022/8. The national central banks of the member states whose currency is the euro must take the necessary measures to comply with the new Guideline and apply it from 21 November 2022. The Eurosystem central banks must comply with the Guideline from 21 November 2022.
In Decision ECB/2022/22, the ECB explains that for reasons of legal certainty, it needed to adopt a new decision to implement changes to the terms and conditions of TARGET2‑ECB that were brought about by repealing Guideline ECB/2012/27. The Decision will enter into force on the fifth day following that of its publication in the Official Journal of the European Union and will apply from 21 November 2022.
On 29 April 2022, the FCA published a new webpage to announce that, following a review, it does not intend to update its list of the most representative services linked to payment accounts and that are subject to a fee in the UK. It believes that the list continues to meet the statutory requirements, contains the most representative services and that its purpose, which is helping consumers make an informed choice when choosing payment accounts, is still being fulfilled.
The Payment Accounts Regulations 2015 (SI 2015/2038) require the FCA to maintain and publish the list, which includes standard terms and definitions to describe linked services that payment service providers (PSPs) must use where applicable. The FCA first published the list in April 2018.
On 12 May 2022, Hong Kong’s Privacy Commissioner for Personal Data (PCPD) published its “Guidance on Recommended Model Contractual Clauses for Cross-border Transfer of Personal Data” (the Guidance).
The introductory sections of the Guidance explain that the PCPD is concerned that the globalization of business and increasing use of mobile and cloud technologies make it more important for organizations to take concrete steps to ensure that the Personal Data (Privacy) Ordinance (Cap. 468) (the PDPO) is complied with in respect of personal data leaving Hong Kong.
The Guidance relates to cross-border transfer controls set out in the PDPO which are not yet in effect, meaning that, in the main, the Guidance serves as best practice recommendations. However, most of the specific compliance measures set out in the Recommended Model Contractual Clauses (the RMCs) included in the Guidance draw from specific obligations under the PDPO that apply irrespective of the PDPO’s cross-border transfer controls, meaning that implementing a number of the components found in the RMCs (or equivalent measures meeting PDPO requirements) is mandatory from a PDPO compliance perspective.
Take a look at this Engage article by members of Hogan Lovells' Hong Kong office for more on this development.
On 29 April 2022, the PRA published a consultation paper (CP5/22) on the definition of a simpler-regime firm under the envisaged new, simpler prudential framework for non-systemic banks and building societies. The framework would consist of layered prudential regimes, over which requirements would expand and become more sophisticated as the size or complexity of firms increases.
In CP5/22, the PRA sets out proposals for the "simpler regime", the prudential layer that will apply to the smallest firms. The PRA also considers the application of the scope criteria in the context of banking groups. It will consult further on the consequences of a firm ceasing to meet the definition of a simpler-regime firm.
The deadline for responses is 22 July 2022. The PRA intends to publish a policy statement on the definition later in 2022 or 2023.
On 4 May 2022, Citi announced it was launching SEPA instant payments across Europe, allowing clients to pay and receive from 36 SEPA countries instantly. The offering allows SEPA Credit Transfers to be made within seconds, 24/7 and funds are available to recipients immediately.
On 4 May 2022, Gucci announced it would accept 12 cryptocurrencies in select US stores and that it plans to extend the pilot to all of its stores in North America. In-store crypto payments will be made with a link sent via email to the customer which contains a QR code that allows payment from their crypto wallet.
On 28 April 2022, messaging app Telegram announced its partnership with Ton Foundation, which will enable users to send and receive toncoin within the app. It will also allow users to buy bitcoin through the app.
On 27 April 2022, Klarna announced it was expanding its partnership with cross-border e‑commerce provider Global-e, enabling merchants in Canada to offer Buy Now Pay Later options. This will offer consumers Klarna's flexible payment options from a number of brands.
On 14 April 2022, Gemini announced the launch of the Gemini Credit Card across the United States, making it the first credit card to offer instant crypto rewards. It allows you to earn bitcoin through everyday purchases.
On 20 April 2022, Monneo announced it is enabling online merchants to accept cryptocurrency payments through their websites. Its latest solution converts the customer's crypto payment into the equivalent value in fiat currency, before Monneo settles it with the international bank account number (IBAN) of the merchant.
On 22 April 2022, Twitter announced its partnership with Stripe to enable Twitter content creators to be paid in $USDC stablecoin. This will make it possible for creators who opt in to having their earnings paid out to a cryptocurrency wallet.
On 12 April 2022 Paymob, an Egypt based digital payments provider, announced plans to start operations in Pakistan after rapid growth in Egypt, Jordan and Kenya. Paymob will be aiming to offer Pakistani merchants online, POS and “Tap on Phone” payment solutions.
On 13 April 2022, Santander announced the launch of the Santander eLockBox, an electronic lockbox that works to consolidate incoming digital payments and simplify electronic receivables management for businesses. The enhanced product offering allows customers to automate their revenue cycle, saving them time, reducing costs, and optimising more resources to help support the core needs of their organisations.
On 12 May 2022, Malaysia-based Razer Merchant Services (RMS), the business-to-business arm of Razer Fintech, announced that it has become an acquirer for Discover Global Network to enable card acceptance at online merchants in Malaysia. According to RMS, by 2023 it aims to enable 2,000 e-commerce merchants in Malaysia to accept Diners Club International, Discover and affiliate network cards for online transactions.
On 9 May 2022, Juniper Research published a study predicting that the global spend using QR code payments will reach over $3 trillion by 2025, rising from $2.4 trillion in 2022. This growth of 25% will be driven by the increasing focus on improving the level of financial inclusion in developing regions and providing alternatives to established payment methods in developed regions.
The new research identified combined loyalty and payment services via a single QR code as a key strategy for increasing adoption. It predicts that loyalty schemes will encourage repeat use and foster consumer trust in QR codes for payments.
The report found that the prospects for adoption and growth are stronger in markets with national schemes in place, due to incentives that promote ease of use for consumers; with increased interoperability being a major enabling factor. In particular, the research found that in India, the transaction value of QR code payments will increase from $62 billion in 2022, to $125 billion in 2026, driven by its national QR code standard and reduced cash usage. Accordingly, it recommends that vendors looking to expand internationally focus on markets with established national schemes.
On 4 April 2022, PWC published its Global Central Bank Digital Currency (CBDC) Index and Stablecoin Overview 2022.
On CBDC:
On stablecoins, the overview noted that currently no stablecoin arrangement is fully regulated. The study referred to recent developments, such as the UK Treasury announcement in March 2022 that it will recognise stablecoins as a valid form of payment in the UK. In Europe, the EU Markets in Cryptoassets Regulation (MiCA) is set to create a harmonised framework for cryptoassets and related services that is due to come into force in 2023 and will apply to all EU member states.
On 25 April 2022, eMerchantPay published research which concluded merchants are losing millions annually due to unoptimised payment strategies. Findings included:
Key detriments to optimal payments performance for merchants across countries involve changing regulations and compliance (38%), as well as a shortage of in-house resources and skills (34%).
However, the research found that robust payment infrastructure paired with an experienced payment service provider can allow merchants to deliver maximum value to their organisation and overcome these obstacles.
Authored by Virginia Montgomery and Julie Patient
Include Notice: Hogan Lovells (Luxembourg) LLP is registered with the Luxembourg bar.