Hong Kong Towards a Leading Global FinTech Hub

24 25 Regulation Part I: Examination of Seven Fintech Hubs most of the UK’s fintech-related actions are subject to existing acts that regulate them. For example, the Financial Services and Markets Act 2000 (FSMA) was introduced as a full, accurate and accessible document detailing the roles and responsibilities of the financial services and market industries. In an attempt to help firms understand whether their cryptoasset activities fall under FCA regulation, the FCA published the Guidance on Cryptoassets 29 in 2019. In January 2021, the UK government published a consultation paper on its regulatory approach to cryptoassets and stablecoins. 30 In addition, the UK government’s fintech development plan includes recruiting up to 100,000 industry workers, launching 30,000 new positions, and establishing 3,300 new fintech companies by 2030. 31 It further refines regulations to help the industry grow and expand. Different actions taken by the UK government so far have been reflected in its efforts to build a regulatory environment that is easy-to-follow and friendly to industry participants. Singapore Singapore is also working diligently in building a strong regulatory environment for fintech. The Monetary Authority of Singapore (MAS) acts as the central bank and is the integrated supervisor for the financial industry, including fintech. It provides support through a number of regulatory initiatives, which has included providing application guidelines to clarify how existing rules apply to Initial Coin Offerings (ICOs) and robo- advisory services. In addition, the MAS has introduced the Fintech Fast Track initiatives to expedite fintech patent applications to as fast as six months (compared with the normal two-year processing time). Previously, Singapore had a complicated regulation framework separated into several acts. In 2019, the MAS introduced a single, clear, and comprehensive Payment Services Act 32 that combines the previous acts and sets up a single regulatory framework for payment services. It has broadened the scope of regulation and established a modular and risk-oriented regulatory structure. This act provides an environment more conducive to innovation in payment services, and also promotes the use of digital payments to create greater efficiency for the market. 33, 34 The MAS issued its first two digital banking licenses and another two digital wholesale bank licenses in 2020. 35 In July 2020, the MAS issued a consultation paper 36 on the new Omnibus Act that included provisions to regulate 29. Financial Conduct Authority. | Guidance on Crypoassets: Feedback and Final Guidance to CP 19/3 (Jul 2019). | https://www.fca.org.uk/publication/policy/ps19-22.pdf 30. HM Treasury. | UK regulatory approach to cryptoassets and stablecoins: Consultation and call for evidence (Jan 2021). | https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/ file/950206/HM_Treasury_Cryptoasset_and_Stablecoin_consultation.pdf 31. HM Treasury, Department for International Trade. | UK fintech: state of the nation (2019). | https://www.gov.uk/ government/publications/uk-fintech-state-of-the-nation 32. Monetary Authority of Singapore. | Payment Services Act (Apr 2019). | https://www.mas.gov.sg/regulation/acts/ payment-services-act 33. Deloitte. | Understanding the regulatory requirements of the MAS Payment Services Act (2019). | https://www2. deloitte.com/content/dam/Deloitte/sg/Documents/financial-services/sg-fsi-payment-services-act-2019-wns.pdf 34. Monetary Authority of Singapore. Payment Services Act: A Guide to the Essential Aspects of the Payment Services Act 2019 (2019). | https://www.mas.gov.sg/-/media/MAS/Regulations-and-Financial-Stability/Regulations- Guidance-and-Licensing/Payment-Service-Providers/Guide-to-the-Payment-Services-Act-2019.pdf?la=en&hash=B 03712F4EEEE907C39BA2C12DE63A545495EE1C2 35. KPMG. Pulse of Fintech H2’20 (Feb 2021). | https://assets.kpmg/content/dam/kpmg/xx/pdf/2021/02/pulse-of- fintech-h2-2020.pdf 36. Monetary Authority of Singapore. | Consultation Paper: Consultation Paper on a New Omnibus Act for the Financial Sector (Jul 2019). | https://www.mas.gov.sg/publications/consultations/2020/consultation-paper-on- the-new-omnibus-act-for-the-financial-sector 37. Singapore Fintech Association. | Singapore fintech landscape 2020 and beyond (2020). | https://www. oliverwyman.com/content/dam/oliver-wyman/v2/publications/2020/dec/singapore-fintech-landscape-2020- and-beyond.pdf 38. Singapore Fintech Association. | Singapore fintech landscape 2020 and beyond (2020, p.14). | https://www. oliverwyman.com/content/dam/oliver-wyman/v2/publications/2020/dec/singapore-fintech-landscape-2020- and-beyond.pdf 39. PYMNTS. | States press regulators to simplify finTech licensing (Feb 2018). | https://www.pymnts.com/bank- regulation/2018/fintech-banking-license-application-occ/ 40. US Federal Reserve. | Consumer compliance outlook: Third issue 2016. (2016). | https:// consumercomplianceoutlook.org/2016/third-issue/laws-regulations-and-supervisory-guidance/ 41. Legislative Analysts’ Office, The California Legislature’s Nonpartisan Fiscal and Policy Advisor. | Reinventing the Department of Business Oversight (Feb 2020). | https://lao.ca.gov/Publications/Report/4181 virtual asset service providers, and significantly impacted the overall Singapore financial services regulatory framework. The MAS proposed to: (1) regulate entities created in Singapore, but carrying on a business of virtual asset activities overseas; and (2) impose licensing, business conduct, and anti-money laundering and counter terrorism financing requirements on such entities. Singapore’s current approach to fintech regulation is welcome by the industry. A recent survey 37 shows Singapore fintech companies overall approve of the government’s regulatory approach, with 86% of respondents agreeing that the Singapore government performs well in its regulatory framework, and 54% agreeing its regulatory attitudes towards fintech activities has significantly improved in the past two years. 38 New York and San Francisco In contrast with the UK’s and Singapore’s approaches to a centralized, country-level regulatory framework, the US has no federal or state-level fintech-specific regulatory frameworks. Before the Office of the Comptroller of the Currency (OCC) started issuing licenses to fintech companies around 2017, the firms would have to apply for a separate license in each state they operated. 39 Depending on the activities of a fintech company, businesses are subject to laws and regulations at both the federal and state levels. For example, financial institutions operating in New York would need to comply with both the Department of Financial Services (DFS), which is responsible for the financial ecosystem at the state level, and the OCC, which manages national banks, federal savings associations, and federal branches and agencies of foreign banks at the federal level. The Federal Reserve recognizes the challenging nature of compliance by fintech companies in such a complex regulatory system, and so they have provided a list of existing laws, regulations, and supervisory guidance relevant to fintech firms and their depository partners, 40 which is merely a starting point for businesses to understand a regulatory environment with such an intricate nature. San Francisco, being another top fintech hub in the US, faces the same problem. To tackle this issue, there is a team of fintech analysts in the Federal Reserve Bank of San Francisco to provide regulation consultation services to fintech companies and banks. In early 2020, California made new plans to revamp the California Department of Business Oversight (DBO) into a direct regulator of fintech companies and providers of related services such as debt collectors and credit reporting agencies. 41 DBO was renamed the Department of Financial Protection and Innovation (DFPI) in September 2020 and San Francisco was one of four locations of the DFPI regional offices.