Hong Kong Towards a Leading Global FinTech Hub

42 43 Government Support Part I: Examination of Seven Fintech Hubs The European hubs: UK and Zurich In Europe, London as the capital city of the UK, which has a strong position and aspiration to develop fintech, is regarded as the fintech leader among its European counterparts. The UK Government published the first Fintech Sector Strategy 107 in 2018. To maintain and extend the country’s comparative advantage, this Strategy presented plans and projects, including recommendations for the FCA and the BoE to collaborate and develop a digital regulatory reporting project to increase compliance efficiency. The Strategy also encouraged FCA to partner with larger financial institutions and fintech firms to attract young talent from diverse backgrounds to build a career in the fintech sector and support the growth of a domestic talent pipeline. In addition, the Strategy laid out the UK’s plan to launch the world’s first Onboarding Guidelines to facilitate partnerships between fintech startups and incumbents. It also announced six Regional Fintech Envoys 108 to accelerate the growth of fintech firms across the country to ensure the balanced development of fintech across the whole nation. Last but not least, the HM Treasury formed a Cryptoassets Taskforce 109 with the FCA and the BoE to examine the risks of cryptoassets and the potential benefits of the underlying Distributed Ledger Technology (DLT). Apart from domestic policy, the UK also formed a Fintech Steering Board 110 that brought together academics, industry experts, government representatives and regulators to drive investment from private sector into the fintech service. In addition to the Fintech Bridge Agreements with other fintech hubs, it partnered with emerging markets to form a supportive fintech ecosystem abroad to promote more financial inclusion and drive greater cross-border activity. Currently, the UK’s plans revolve around maintaining its position as a leading fintech hub in Europe, with its utmost mission being to ensure that London continues to be a leader of global financial services after Brexit. Tackling cyber risk in the EU financial system is the current top priority of the European Parliament. The Swiss FINMA also regards fighting cyber risk as its top priority, as banks are exposed to the increasing risk of cyberattacks, especially as IT services are increasingly being outsourced. Although no specific initiatives have been announced, the FINMA is recruiting experts in managing cyber security risk to prevent breaches. In terms of market size, the Zurich region is the largest financial center in Switzerland, accounting for 45% 111 of the economic value in the Swiss financial sector. Zurich is also home to Swiss Sustainable Finance (SSF), a national platform with an international network focusing on strengthening Switzerland’s position in the global marketplace for sustainable finance by informing, educating, and fostering growth. Being one of the frontrunners in sustainable finance in the world, the Swiss strive to become a leading international hub in this arena. Early in the 1980s, Switzerland launched the first sustainable financial instruments and in the 1990s became home to the first asset management company focused solely on sustainable investment. In 2018, assets worth around CHF$720bn (US$788bn) were managed according to environmental, social and governance (ESG) criteria, equivalent to around 21% of total assets under management in the country. Compared with the global average of sustainable investments at roughly only 11%, 112 the Swiss figure highlights the effort and expertise of its financial sector in pursuing sustainability. The American hubs: New York and San Francisco A vast variety of fintech companies have chosen the US as their starting point. New York is currently the fastest-growing fintech ecosystem, while San Francisco is the top innovation hub in the country. Without a central coordinator at the federal level to regulate fintech activities, state regulators might have different plans for their own states that they may also aspire to apply nationwide. California had a plan in early 2020 to create an Office of Innovation in San Francisco and serve as a hub for both fintech startups and blue-chip financial companies, 113 but more than a year has passed without any further development. On the other hand, the newly formed Department of Financial Protection and Innovation (DFPI) has become the primary state regulator for most fintech companies in California. The DFPI is to establish an Office of Financial Technology Innovation 114 based in San Francisco, which is expected to engage with the financial services sector, fintech companies, and consumers to advocate and shape its policies. The first task of the office is to examine the state regulatory scheme for digital currency. The New York DFS was set up to demonstrate New York regulators’ leading expertise in regulating innovative financial services while protecting individuals. It was the first state agency to release a comprehensive framework for regulating digital currency related to businesses with the implementation of the BitLicenses . As of May 2020, 25 companies have been authorized to conduct digital currency operations. New York state also exemplifies state collaboration with the Conference of State Bank Supervisors (CSBS), announced in 2019. In recent years, state regulators have focused on developing greater cooperative approaches to supervise non-bank financial services companies. For example, the Nationwide Multi-state Licensing System (NMLS) , a technology platform that functions as a system to record all licensing activities of 62 state or local government agencies. 115 The state allows companies engaged in virtual currency business activities to use the NMLS to apply for, update, and renew their operating licenses, including BitLicenses . 112. Swiss Banking. | Sustainable finance in Switzerland: from pioneer to a premier international hub - Basic positions and effective approaches (Jun 2020) | https://www.swissbanking.ch/_Resources/Persistent/3/3/e/7/33e7c9a4 74c72717e1cd19bc547b6f048a020b56/SBA_SustainableFinance_2020_EN.pdf 113. Bloomberg Law. | California Aims to Foster Fintech Innovation. Don’t Say Sandbox (1) (Jan 2020). | https://news. bloomberglaw.com/banking-law/california-aims-to-foster-fintech-innovation-dont-say-sandbox 114. Department of Financial Protection and Innovation. | Governor Newsom Proposes to Revamp DBO with Stronger Consumer Financial Protections and Enforcement Team (Jan 2020). | https://dfpi.ca.gov/2020/01/15/january- 2020-monthly-bulletin/ 115. CSBS. | Nationwide MultiState Licensing System. | https://www.csbs.org/nationwide-multistate-licensing- system#nmls-resources 107. HM Treasury. | Fintech Sector Strategy: Securing the Future of UK Fintech (Mar 2018). | https://assets.publishing . service.gov.uk/government/uploads/system/uploads/attachment_data/file/692874/Fintech_Sector_Strategy_ print.pdf 108. Department of International Trade. | UK Fintech – State of Nation (Apr 2019). | https://assets.publishing.service . gov.uk/government/uploads/system/uploads/attachment_data/file/801277/UK-fintech-state-of-the-nation.pdf 109. HM Treasury, FCA, Bank of England. | Cryptoassets Taskforce: final report (Oct 2018). | https://assets.publishing . service.gov.uk/government/uploads/system/uploads/attachment_data/file/752070/cryptoassets_taskforce_ final_report_final_web.pdf 110. Department of International Trade. | UK Fintech – State of Nation (Apr 2019). | https://assets.publishing.service . gov.uk/government/uploads/system/uploads/attachment_data/file/801277/UK-fintech-state-of-the-nation.pdf 111. Zurich Financial Center. | Facts and Figures 2019/2020 edition (Jan 2019). | https://www.zh.ch/content/ dam/zhweb/bilder-dokumente/themen/wirtschaft-arbeit/wirtschaftsstandort/dokumente/englisch/zurich_ financialcenter_factsfigures_2019_2020.pdf Overall Observation of the Hubs’ Development Plans While the European and American hubs are exploring their best moves for the long- term development of their fintech ecosystems, the Asian fintech hubs seem to be equipped with solid development plans and each is determined to claim the ultimate position as a top global fintech hub.