Making a decision can be tricky but not making it yourself doesn’t mean it dosesn’t get decided. Confused? Don’t worry, you’ll soon find out why it’s important to decide for yourself and in what specific context. This and more in the latest edition of the FinTechnologist Weekly:
To Do Or Not To Do
Better Late Than Never
Let’s start with some news I missed last week or rather only found about this week, but thought to be relevant since Hong Kong has laid out its plans for fintech for the new future. The Hong Kong Special Administrative Region (HKSAR) unveiled its new strategy called Fintech 2025 that aims to drive fintech development in Hong Kong and includes further testing of digital currencies, which as we know is a bit of a tricky subject over there.
The HKMA wants to encourage the financial sector to adopt technology comprehensively by 2025 and promote the provision of fair and efficient financial services with a concentration on five focus areas:
All banks go fintech, i.e. the promotion of the all-round adoption of fintech by Hong Kong banks
Future-proofing Hong Kong for Central Bank Digital Currencies continuing the ongoing research on the matter
Creating the next-generation data infrastructure
Expanding the fintech-savvy workforce to increase the supply of fintech talent through collaboration with various strategic partners
Nurturing the ecosystem with funding and policies
The last point might be the most interesting one to find out about, but the HKMA was a bit vague on this point, so it will remain to be seen what exactly they have in mind.
Do Something Now
Last week, we talked about the concerns of a number of regulators about the operations of cryptocurrency exchanges in particular with a view to money laundering, remember? We also managed how the ones that are the most active on that front like the FCA struggle to get everybody on board in time, but it’s clear that something needs to be done. That’s also what the Basel Committee thinks as it published a consultation paper on the prudential treatment of cryptoasset exposures where it highlights a range of concerns including consumer protection, money laundering and terrorist financing, and their carbon footprint. You will probably agree that regulators and lawmakers need to tread carefully not to trample feeble fintech plants, but you might also agree that there are a thing or two that aren’t quite right and could be handled better.
The report points out that „the growth of cryptoassets and related services has the potential to raise financial stability concerns and increase risks faced by banks“. Rightfully, it stresses that certain cryptoassets have exhibited a high degree of volatility, and could present risks for banks as exposures increase, including liquidity risk; credit risk; market risk; operational risk including fraud and cyber risks; money laundering / terrorist financing risk; and legal and reputation risks, which is a long list of things to cover.
The Committee suggests an approach that focuses on simplicity and minimum standards as well as the principle of a same risk, same activity, same treatment if a crypto asset provides equivalent economic functions and poses the same risks compared with a traditional asset. Sounds reasonable, but I would recommend reading the full report for everyone interested in crypto assets as it not only sets out a potential regulatory framework but discusses various other (technical) elements.
Wise, formerly known as TransferWise, is about to list on the London Stock Exchange and will make its founders rich. An article in the Guardian tells the story of the personal frustration that led to the building of one of the most successful fintech stories and if you have been transferring currencies from one country to another like me, you’ll know the pain they are talking about. Well, they outsmarted an outdated system, helped people like me save money, so I suppose it’s only fair that they have their massive payday.
According to reports, the listing is expected to be finalised on July 5, with Wise aiming for a freefloat of at least 25%, a bookrunner said, with
Goldman Sachs, Morgan Stanley and Barclay the lead financial advisers on the deal, and Citigroup acting as co-adviser, which is kind of ironic, if you consider that these are the institutions they outsmarted, but that’s the way all successful FinTech stories go, I reckon.
Off the Agenda
And lastly, but not the least less interesting I would say is the decision of the SEC to leave out any mention of cryptocurrency or Bitcoin (BTC) in their 2021 regulatory agenda (and especially in the light if what we discussed above). It comes as a surprise as the SEC Chairman Gary Gensler has highlighted that cryptocurrency exchanges are in need of regulation with the SEC has enacted 75 crypto-related enforcement actions against BTC futures funds, so not focusing is a two-edged sword: on one hand it might put investors at ease who fear a crackdown, on the other hand it kicks the can down the road on decisions on BTC ETFs, which are seen as an important encouragement for the developing adoption of crypto assets. Interesting, as I said, isn’t?
And that’s all for this week but ff you have an interesting story or would join me on the podcast, connect on Twitter.
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