Ban Hammer: UK Financial Conduct Authority Proposes Prohibition of Crypto Derivatives

The UK Financial Conduct Authority (FCA) has proposed a ban on the sale of both derivatives and exchange-traded notes (ETNs) based on “certain types of cryptoassets.”

This ban will impact retail investors.

As part of the decision-making process, the FCA has commenced a public consultation on a ban.

The FCA believes these types of crypto-derivatives may cause harm to retail consumers. The financial regulator said “these products are ill-suited to retail consumers who cannot reliably assess the value and risks of derivatives or ETNs that reference certain cryptoassets (crypto-derivatives).

The FCA stated this is due to:

  • Inherent nature of the underlying assets, which have no reliable basis for valuation
  • The prevalence of market abuse and financial crime in the secondary market for cryptoassets (eg cyber theft)
  • Extreme volatility in cryptoasset price movements, and
    inadequate understanding by retail consumers of cryptoassets and the lack of a clear investment need for investment products referencing them

The FCA’s consultation proposes a prohibition on the sale, marketing, and distribution to all retail consumers of all derivatives (ie contract for difference – CFDs, options and futures) and ETNs that reference unregulated transferable cryptoassets by firms acting in, or from, the UK.

The FCA said a ban will create a potential relief for retail consumers of between £75 million to £234.3 million a year.

Christopher Woolard, Executive Director of Strategy & Competition at the FCA, stated:

‘As with our work on the wider CFD and binary options markets, we will act when we see poor products being sold to retail consumers. These are complex contracts built on top of complex assets.

Woolard added that most consumers cannot reliably value derivatives based on unregulated cryptoassets.

“Prices are extremely volatile and as we have seen globally, financial crime in cryptoasset markets can lead to sudden and unexpected losses. It is therefore clear to us that these derivatives and exchange traded notes are unsuitable investments for retail consumers.”

The FCA is currently in the midst of a broader consultation regarding digital assets. The document will be published later this summer.

Yesterday, in a speech delivered at Cambridge University, Woolard shared the FCA’s evolving approach to the issuance and utilization of “stablecoins.”

UK Financial Conduct Authority Addresses Topic of Stablecoins Providing Insight into Regulatory Approach

In a speech presented today by Christopher Woolard, Executive Director of Strategy and Competition at the UK Financial Conduct Authority (FCA), the regulator addressed the hot topic of “stablecoins.” The speech was delivered at the annual Cambridge Centre for Alternative Finance conference which saw regulators from all over the world visit the Judge Business School at Cambridge University to discuss emerging Fintech innovations and the future of finance.

Earlier this month, Facebook announced the creation of a stablecoin labeled “Libra.” Facebook’s spin on crypto is designed to become a global payment platform removing much of the intrinsic friction and cost associated with existing payment rails.

The Facebook stablecoin is a “basket of assets” designed as a type of corporate currency which will hold a relatively consistent value. Additionally, Libra’s blockchain is able to create smart contracts similar to Ethereum – currently, the most popular blockchain for creating utility type features for the cryptosphere.

Woolard provided an interesting perspective from the FCA, globally viewed as the most innovative regulator when it comes to Fintech innovation.

Woolard said the term “Stablecoin” has been widely adopted by the crypto industry as a distinct sector of cryptoassets. He noted that depending on the characteristics of an individual stablecoin, it could, or may not, sit within the FCA’s regulatory perimeter.

“As has been widely reported, along with other regulators and central banks, we have been discussing their plans with Facebook. If this comes to fruition, Libra could be very significant indeed,” stated Woolard. “It will pose questions for us as a regulator. It will pose questions for our colleagues at the Bank of England. It will pose questions for us working with our international partners. Moreover, its size and scale will pose questions for society and government more generally about what is acceptable and desirable in this space.”

Woolard said the term stablecoin is a “broad term” which encompasses a variety of cryptoassets. Some may be pegged to a single fiat currency, others linked to an asset like gold, or perhaps defined by an algorithm. Regardless, the FCA looks at each crypto individually to determine its makeup before determining their regulatory approach.

A stablecoin could constitute e-money if it meets the definition provided in the Electronic Money (e-money) Regulations.

A “stablecoin” could fall between regulatory categories. Because of this, the FCA questions the accuracy of the label.

If a cryptoasset is e-money then the issuer needs to be authorized as an e-money issuer and needs to comply with all relevant requirements under the E-Money and Payment Services Regulations.

If a stablecoin is algo-driven it would need to be judged on its characteristics. Or perhaps it may be considered a regulated product such as a collective investment scheme. It simply depends.

“Volatility and stability are important concepts, but they are relative in nature,” said Woolard. “Whilst a wobbly tripod is seldom a good thing in the world of wildlife photography, ’volatility‘ in financial services is completely context-dependent.”

He said that FCA does not have criteria for endorsing the stability of any cryptoasset.

“What is this thing, why is there a new term and what problem is it trying to address? Who is it for – wholesale banks or retail consumers? Is it within our regulatory scope or outside? Is this really an innovation or just something old in a new, flashy wrapper?”

Woolard said the FCA reviews each question as to the benefit to consumers or how it impacts competition. The agency also questions if there is harm created due to increased risks or complexity.

“In short, we seek to consider any cryptoasset, including those labeled “stablecoin,” on a case-by-case basis and we encourage both consumers and firms to do likewise.”

Additionally, does the “stablecoin” adhere to international regulatory standards such as AML and KYC. An important question, especially in light of the recent FATF guidance for VASPs.

The FCA is nearing the end of a consultation on cryptoassets. The comments have been received and the regulator is correlating them now. The final response will be forthcoming shortly as the FCA provides additional clarity regarding their regulatory approach when it comes to crypto.

In the end, the FCA does not accept the stamp of stablecoin at face value. A smart approach.

Recent events at Tether, the largest stablecoin by market cap, uncovered glaring shortcomings in the sector which begs for more stringent regulation.

This will hold true for any aspiring stablecoin including Facebook’s attempt to create its own version of a Euro type basket of assets. Libra is a crypto that can expect stiff regulatory challenges. While moving fast and breaking things can drive change it also forces regulators to slow things down.

“When considering these changes as regulators we need to be ready to lean in, to experiment, learn and adapt, but always be ready to protect consumers, competition and market integrity,” Woolard said, “… In other words, we, ourselves need to go behind the scenes.”


FCA Competition Director Christopher Woolard Testifies before House Committee Fintech Task Force

Financial Conduct Authority (FCA) Director of Competition Christopher Woolard testified before the House Financial Services Committee Fintech Task Force today.

The other witnesses participating in the hearing included:

  • Paul Watkins, Assistant Director, Office of Innovation, Consumer Financial Protection Bureau (CFPB)
  • Beth Knickerbocker, Chief Innovation Officer, Office of the Comptroller of the Currency (OCC)
  • Valerie Szczepanik, Associate Director of the Division of Corporation Finance and Senior Advisor for Digital Assets and Innovation, Securities and Exchange Commission (SEC)
  • Charles E. Clark, Director, Department of Financial Institutions, State of Washington, on behalf of the Conference of State Bank Supervisors (CSBS)

The newly formed Task Force is designed to seek out solutions to encourage benevolent innovation in the financial services sector.  Announced by House Financial Services Committee Chairwomen Maxine Waters in May, the bipartisan Committee will hold hearings for legislators to better understand innovations in financial services.

Woolard, as a member of the leading global regulatory body when it comes to facilitating Fintech, provided valuable non-US perspective to committee members. As the regulatory ecosystem is less fragmented in the UK, the two jurisdictions can generate a good amount of contrast. The UK is widely recognized as the gold standard in embracing change.

In the US, financial services must submit to a dozen or so federal regulators as well as 50 different state regulators which are loathe to reduce any of their political influence. The US regulatory system is convoluted and Byzantine at its best.

In the UK, the FCA is the lead regulator when it comes to much of the financial services industry acting as a point of focus for innovation.

While Woolard’s opening testimony was brief, he provided the below presentation for Committee members to review.

A handful of other US federal regulators, besides the four mentioned above, were unable to attend.

The Financial Conduct Authority Updates Rules for Peer to Peer Lending, Boosts Investor Protection Including Cap on Retail Investors

The UK Financial Conduct Authority (FCA) has published a long-anticipated update to crowdfunding rules. More specifically, the FCA has “enhanced” aspects of investor protection for investors participating in peer to peer lending (P2P). Rules for investment crowdfunding, on the other hand, came out largely unchanged.

In the UK, the term crowdfunding references both loan based platforms, or P2P platforms, as well as investment crowdfunding. Both of which are regulated by the FCA.

The P2P lending industry was founded in the UK and is considered a touchstone for the entire sector globally. Over the years, the UK has been viewed as a market that has embraced Fintech innovation, encouraged by a light touch regulatory approach.

The new rules were the product of a public consultation which arrives at a crucial time for the P2P lending industry. Late last month, P2P lender Lendy fell into administration causing anxiety within the sector of Fintech and additional pressure on policymakers to address the online lending industry. The collapse of Lendy most certainly influenced the regulator’s response to the updated P2P rules.

The FCA said the new rules are designed to prevent harm to investors, without stifling innovation in the P2P sector. Since bespoke rules for the industry were announced years ago, the FCA has periodically reviewed the sector.

Over the years, the industry has changed as platforms have sought to remain competitive while creating value for both investors and borrowers.

The FCA stated:

“[The] P2P sector had developed a wider, more complex, range of business models. Many platforms in the sector are now taking a much more active role, by taking decisions on behalf of the investor. In addition, we explained that we had also seen some poor business practices, for example, in disclosure of information to clients, charging structures, wind-down arrangements and record keeping.”

The FCA said the new rules would allow firms and fundraisers to operate in a long-term, sustainable manner.

In a release, Christopher Woolard, Executive Director of Strategy and Competition at the FCA, stated:

“These changes are about enhancing protection for investors while allowing them to take up innovative investment opportunities. For P2P to continue to evolve sustainably, it is vital that investors receive the right level of protection.”

The UK Peer to Peer Finance Association (P2PFA) Chair, Paul Smee, issued a statement commenting on the rules:

“Much of what is included in the FCA policy statement published today reflects what is already good practice in the peer to peer lending market and we welcome that. We are pleased that the FCA recognises the significant and positive impact which peer-to-peer lending has on the economy, as the sector becomes a mature feature of the UK financial services landscape; and we consider that overall they are proposing a proportionate way forward for regulation.”

Smee said the update from the FCA is a long and complex document so they will be “doing further analysis on its implications for the market.”

“We will be monitoring especially closely the impact of marketing restrictions on how retail investors can participate in this important asset class and will let the FCA know if there is evidence that their rules are proving an unnecessary obstacle,” added Smee.

The UK’s largest SME P2P lender, Funding Circle, took a diplomatic approach: James Meekings, Co-founder and UK MD, stated:

“We welcome today’s proposals. Funding Circle has consistently campaigned for industry regulation that protects consumers and raises industry standards. We look forward to working closely with the FCA on the implementation of these new rules.”

 Bruce Davis, co-founder and Joint MD of Abundance Investment – a debt-based crowdfunding platform, said the rules leveled the playing field:

“The review of the sector involved unprecedented levels of data collection and scrutiny including independent research from the leading Universities studying the sector (Cambridge and Leeds).  We welcome the proposals which level the playing field between loans and debentures in terms of the way in which the sector helps investors to understand the risks of investment which has always been the focus of the industry from its inception.”

So what has changed for P2P lenders?

The FCA has “refined” the new rules seeking to better protect consumers. The FCA said that platforms will not be prevented from including information about specific investments in their marketing materials but the update includes a limit on investments for retail customers to 10% of investible assets. The FCA said they do not want smaller investors to “over-expose themselves to risk.”

Importantly, this specific restriction will not apply to new retail customers who have received regulated financial advice.

The FCA admitted that the 10% restriction was not a popular confine within the P2P lending sector. In fact, most of the P2P platforms responding to the FCA proposal felt the approach was “disproportionate and a blunt tool to achieve the FCA’s stated consumer protection objective.”

The FCA said that many P2P platforms said that asking an investor to classify themselves as retail or not was “intrusive and off-putting in an online context.” The 10% cap was deemed “arbitrary.” The P2P industry said the restriction would limit competition and give a “misleading impression of the riskiness of P2P investments.”

Part of the concern most likely manifested itself from the fact that different P2P platforms allow for varying degrees of risk. Yet the FCA has bundled them all up in a single category thus not completely recognizing the diversity of risk differentials. The highest risk offerings are now deemed similar to investments with lesser risk as well as a lower return.

Other new P2P rules of note include:

  • More explicit requirements to clarify what governance arrangements, systems, and controls platforms need to have in place to support the outcomes they advertise, with a particular focus on credit risk assessment, risk management and fair valuation practices.
  • Strengthening rules on plans for the wind-down of P2P platforms if they fail.
  • Introducing a requirement that platforms assess investors’ knowledge and experience of P2P investments where no advice has been given to them.
  • Setting out the minimum information that P2P platforms need to provide to investors.
  • Applying the Mortgage and Home Finance Conduct of Business (MCOB) sourcebook and other Handbook requirements to
  • P2P platforms that offer home finance products, where at least one of the investors is not an authorised home finance provider.

The new rules and guidance will come into force on December 9, 2019, with the exception of applying MCOB to P2P platforms that offer home finance products, which comes into force today (June 4, 2019).

As the final document was released only today, industry feedback and review will be ongoing.

The FCA said it will continue to closely monitor the P2P market as it develops further.

Deeds Not Words. Christopher Woolard of FCA Announces First Cross Border Tests for Fintechs

It is UK Fintech Week in London and there has been a flurry of announcements regarding new programs designed to boost the status of London as a leading Fintech hub.

In a speech this morning, Christopher Woolard, Executive Director of Strategy and Competition at the FCA, declared that deeds are more important than just words.

Woolard discussed the ” next stage of the FCA’s innovation journey,” after five years on the job. Today, Innovation at the FCA is a “fully formed” division of the regulator.

Woolard announced the “first cross-border tests of the Global Financial Innovation Network (GFIN)” to test new propositions. Today, GFIN claims a network of 29 global organizations.

Asking the question if the pursuit of Fintech innovation is working? Woolard stated, “the progress we have made is significant and real.”

“We’re enabling innovations onto the market faster. Groups of firms that have gone through our Innovate programme have come to market 40% faster than equivalent financial services firms. That equates to shaving three months from testing to roll out. Nearly 700 firms have received some kind of assistance from our innovation work. Of the 47 firms that have completed Sandbox testing, around 80% are operating in the market, with the necessary authorisation, and there are a further 63 in the pipeline. Of the 44 start-ups that tested in the first three Sandbox cohorts, almost half either received additional investment or were acquired during or after their test,” stated Woolard.

Woolard said they are at the point where things once viewed as niche are now really becoming mass market.  Sophisticated technologies are producing results for “real public gain.” Woolard believes the results are indicative of the “power of innovation.”

Of course, there remains much to do, said Woolard, as while the pace of change may adjust, innovation never stops. “The journey continues..”

UK Financial Conduct Authority Issues Consultation on “Cryptoassets” Seeking to Provide Clarity on Regulatory Approach

The UK Financial Conduct Authority (FCA) issued a consultation today on the emerging “cryptoasset” sector of finance.  The UK is well known for its thoughtful regulatory approach when it comes to innovative new financial services and the final outcome will be watched with interest around the globe.

The cryptoasset consultation is also part of the UK Cryptoasset Taskforce’s recommendation that the FCA provides additional guidance on the regulatory perimeter. The Taskforce published a report last October.

Christopher Woolard, Executive Director of Strategy and Competition at the FCA, commented on the consultation:

‘This is a small but growing market and we want both industry and consumers to be clear what is regulated, and what isn’t. This is vital if consumers are to know what protections they’ll benefit from and in ensuring we have a market functioning as it should.”

In a release, the FCA said the numbers regarding crypto remain relatively small but more consumers are investing in these digital assets.

Today, within the UK there are less than 15 cryptocurrency exchanges in operation out of a global total of about 231. Out of these exchanges in the UK, only 4 produce daily trading volume in excess of $30 million with aggregate daily trading volume of just $200 million for the group.

There are currently over 2,000 exchange and utility tokens in the market reports the agency. The FCA notes that in 2018 initial coin offerings (ICOs) saw a significant reduction in capital raised in compared to 2017. Global ICO funding was $65 million in November 2018, compared to over $823 million in November 2017.

The FCA estimates that there are 56 projects in the UK that have used ICOs, accounting for less than 5% of projects globally.

The FCA has previously issued warnings regarding the risk to consumers affiliated with investing in cryptoassets. About 78% of ICOs in 2017 were labeled scams. Yet the agency continues to pursue an important policy of ensuring competition in financial services – IE challenges to traditional finance – while providing sufficient investor protection.

The FCA states that publishing guidance should “reduce legal uncertainty and assist firms to develop legitimate cryptoasset activities and business models.” The intent is to “improve participation in the cryptoasset market and competition in the interest of consumers.”

Overall, the UK’s regulatory approach has been lauded around the world for fostering a robust Fintech ecosystem. Digital assets may be the most challenging project associated with the regulator’s portfolio of regulatory objectives.

Drawing the Line.

Most every crypto industry participant recognizes the need for bright-line rules to engender a successful sector of finance. Clear guidance has been missing in much of the world with some jurisdictions choosing to regulate via enforcement actions. Once guidance is finalised expectations are that it will be clear what is regulated by the FCA – and what is not.

Cryptoassets are a cryptographically secured digital representation of value or contractual rights that is powered by forms of DLT and can be stored, transferred or traded electronically. Examples of cryptoassets include Bitcoin and Litecoin (which we categorise as exchange tokens), as well as other types of tokens issued through the Initial Coin Offerings (ICOs) process (which will vary in type).

The Consultation states:

“The final Guidance will enable firms to understand whether certain cryptoassets fall within the regulatory perimeter. This should allow firms to have increased certainty around their activities while meeting our own regulatory objectives of consumer protection, enhancing market integrity and promoting effective competition in the interest of consumers. We encourage firms to seek expert advice if you are unsure whether the products you offer fall within the regulatory perimeter.”

The FCA has defined three different types of cryptoassets:

  • Exchange tokens: these are not issued or backed by any central authority and are intended and designed to be used as a means of exchange. They are, usually, a decentralised tool for buying and selling goods and services without traditional intermediaries. These tokens are usually outside the [FCA] perimeter.
  • Security tokens: these are tokens with specific characteristics that mean they meet the definition of a Specified Investment like a share or a debt instrument as set out in the RAO, and are within the [FCA] perimeter.
  • Utility tokens: these tokens grant holders access to a current or prospective product or service but do not grant holders rights that are the same as those granted by Specified Investments. Although utility tokens are not Specified Investments, they might meet the definition of e-money in certain circumstances (as could other tokens), in which case activities in relation to them may be within the [FCA] perimeter.

Exchange tokens, such as Bitcoin, are not considered to be money by either the FCA nor the Bank of England as these assets are simply too volatile to be considered a store of value, and, at least currently, are not widely accepted as a medium of exchange. Stablecoins are also considered to be exchange tokens yet the FCA adds that Stablecoins can be securities as well.

So where does the FCA seek to draw the line for security tokens?

Within the consultation, the FCA indicates that whether the token is transferable and tradeable on cryptoasset exchanges or any other type of exchange or market, this may be indicative that a token is a “Specified Investment” – thus a security. Simultaneously, the consultation states:

“Much like exchange tokens, utility tokens can usually be traded on the secondary markets and be used for speculative investment purposes. This does not mean these tokens constitute Specified Investments.”

The consultation includes several examples of what is, and what is not, a utility token.

This question may garner considerable interest from industry participants. The FCA says “the more decentralised the network the less likely it is that the token will confer enforceable rights against any particular entity, meaning it may not confer the same or equivalent rights as Specified Investments.”

In Europe, several jurisdictions have pursued, or are pursuing regulations that are viewed as supportive of crypto. France expects to enact law in early 2019 that defines their regulatory approach to crypto. The FCA has most certainly reviewed the proposed French regulation.

The Cryptoasset Consultation is open to feedback until Friday 5 April 2019. Stakeholders may submit responses via email to

Final Guidance on the existing regulatory perimeter in relation to cryptoassets will be published “no later than summer 2019.”

Download FCA Guidance on Cryptoassets here.

In a Speech, UK Regulator Defines Their View of Cryptoassets and Next Steps towards Regulation

Speaking last week at the Regulation of Cryptocurrencies event in London, Christopher Woolard, Executive Director of Strategy and Competition at the Financial Conduct Authority (FCA), outlined his agencies view of crypto assets and provided insight into possible regulation.

Woolard defined digital assets or cryptocurrencies as falling under three separate categories:

  • Exchange tokens. Cryptoassets, such as Bitcoin, Litecoin and equivalents, are often referred to as ‘cryptocurrencies’. We prefer the more neutral term “exchange tokens” as they do not function as money (link is to a speech by the Bank of England). Exchange tokens utilise a DLT [blockchain] platform and are not issued or backed by a central bank or other central body. They do not provide the types of rights or access provided by security or utility tokens, but are used as a means of exchange or for investment.
  • Security tokens. These are tokens, which amount to a ‘specified investment’. These may provide rights such as ownership, repayment of a specific sum of money, or entitlement to a share in future profits. They may also be transferable securities or financial instruments under the EU’s Markets in Financial Instruments Directive II (MiFID II).
  • Utility tokens. These are tokens which can be redeemed for access to a specific product or service that is typically provided using a DLT platform. They typically fall outside the FCA’s regulatory perimeter.

Woolard stated that “cryptoassets have not intrinsic value.” These digital assets may be used in three separate ways:

  • As a means of exchange, enabling the buying and selling of goods and services, or to facilitate regulated payment services
  • For investment, with firms and consumers gaining direct exposure by trading cryptoassets, or indirect exposure by trading financial instruments that reference cryptoassets, and
  • To support capital raising and/or the creation of decentralised networks

While concerned about the potential harm cryptoassets may deliver to investors, the FCA also notes that these same assets may deliver beneficial innovation.

The FCA and its regulatory sandbox has worked directly with blockchain based firms and thus has had hands-on exposure to the emerging realm of digital assets.

The FCA is part of the ongoing UK Cryptoassets Taskforce, an ad-hoc entity that recently published an interim report on crypto, and Woolard is of the opinion that “it’s clear strong and speedy action is necessary.”

So what is next? A more conclusive report is expected in early 2019. Woolard believes that beneficial innovation should be encouraged while  “financial crime is combatted, market integrity is safeguarded and consumers are adequately protected from harm.” He also points towards the global nature of crypto and the need for international coordination.

One area that was not addressed was the exchangeability of utility tokens. Some industry commentators seek this as a crucial variable in the regulatory debate as most current purchasers in coin offerings, that are presented as non-securities, benefit from inherent speculation by purchasers.

The FCA, and the UK in general, is recognized as the “gold standard” when it comes to encouraging Fintech innovation. The forthcoming regulatory update will be watched closely by both industry participants and global regulators as the UK continues its policy leadership role in financial regulation.

The speech in its entirety is available here.

UK Financial Sector Regulator May Prohibit Crypto Derivatives

A representative from the UK Financial Conduct Authority (FCA) told attendees at The Regulation of Cryptocurrencies event in London today that he is concerned that “Complex, volatile and often leveraged derivatives products” built on cryptocurrencies with “underlying market integrity issues” are being marketed to retail investors.

For this reason, said Christopher Woolard, FCA Director of Strategy and Competition,

“The FCA will…consult on a prohibition of the sale to retail consumers of derivatives referencing certain types of crypto assets (for example, exchange tokens), including contracts-for-difference, options, futures and transferable securities.”

Woolard has been working with the Cryptoassets Task Force, a joint effort between the FCA, the HM Treasury and the Bank of England, which published its report at the end of October.

While the Task Force identified, “…examples of cryptoassets and other applications of DLT delivering beneficial innovation in financial services,” it also identified “3 major harms” as well as a general risk to “current financial stability” posed by the unregulated circulation of crypto-assets.

“The first harm is to consumers,” said Woolard, “who may buy unsuitable products, face large losses, be exposed to fraudulent activity, struggle to access market services, or be exposed to the failings of service providers, such as exchanges.”

Many cryptocurrency users have experienced trouble getting money off and onto exchanges, although this is often due to problems the exchanges have maintaining open channels with banks because their services operate in a regulatory grey zone the world over.

Investors have also lost funds in numerous million- and hundred-million dollar hacks on exchanges like Mt Gox and Coincheck.

“Then there’s potential harm to market integrity,” Woolard added, due to, “Opaque practices and misconduct (that) could damage confidence in wider market functioning.”

The cryptocurrency and “digital asset” investing worlds are often referred to as “The Wild West.” Conduct has been largely self-regulated, to varying effect. Hacks, manipulation, exchanges trading against customers, and ICO fraud are either common or commonly alleged, and a spate of lawsuits are underway/expected.

It was and is hoped that “digital asset” investing could help companies cut red tape in capital raisomh and give retail investors access to start up investing, but these prospects so far has proven very high risk.

Bitcoiner and creator of “Ravencoin” Bruce Fenton recently tweeted that he doubts that an imminent morphing of “Initial Coin Offerings” (ICOs) into Security Tokens will improve their quality:

Woolard expressed a similar sentiment when he told the London crowd that, “cryptoasssets have no intrinsic value — they are not a claim on any tangible underlying source of value.”

“Cryptoassets” can currently be created by anyone on several platforms. They are digital and therefore ephemeral, said Woolard:

“They may have extrinsic value like many non-financial objects such as a work of art but that value can disappear particularly where there is no physical asset.”

The third risk posed by currencies and tokens that travel the Internet freely, said Woolard, is that of financial crime, “…where cryptoassets have been used as part of illicit activity such as money laundering and fraud.”

Woolard said the Financial Stability Board does not think that cryptocurrencies in the short term pose a threat to global financial stability, “…But it’s crucial we remain vigilant should the market grow or cryptoassets become more widely adopted.”

In addition to considering a prohibition of crypto-derivatives, Woolard said the HM Treasury will also, “consult on whether the regulatory perimeter requires an extension to capture cryptoassets that have comparable features to specified investments but currently fall outside the perimeter.”

The treasury will also, “…undertake one of the most comprehensive responses globally to the use of cryptoassets for illicit activities by…going further than the existing directive, the fifth EU Anti-Money Laundering Directive (5AMLD)…(to consult on how…) to transpose 5AMLD and broaden the scope of anti-money laundering and counter-terrorism financing regulation…”

All told, Woolard said that meaningful risk-management of cryptocurrencies and “digital assets” will have to be globally coordinated with “….international counterparts, including standard-setters and other national jurisdictions.”

UK Competition and Markets Authority Tells Banks to Work Harder for their Customers, Demands Change

The Competition and Markets Authority (CMA), in conjunction with the Financial Conduct Authority (FCA), have demanded that traditional banks improve their services. The admonition comes following an independent survey of both personal and small business accounts that indicates banks are falling short when it comes to customer service.

As of this week, banks are now required to publish info as to “how likely people would be to recommend their bank – as well as its online and mobile banking, branch and overdraft services – to friends, relatives or other businesses.” This must be displayed prominently both at physical locations and online – including any mobile apps.

Additionally, banks will must now provide information about the number of major operational and security incidents they have experienced, and provide updates on their websites.

Beginning in February 2019, the FCA will require banks to publish figures on how long it takes to open current accounts and replace debit cards.

The intent is to drive competition within financial services and thus improve the quality of service to both individuals and businesses. This is also part of the Open Banking push – an area where the UK is viewed as a leader globally.

Adam Land, Senior Director at the CMA, commented on the report;

“For the first time, people will now be able to easily compare banks on the quality of the service they provide, and so judge if they’re getting the most for their money or could do better elsewhere. This is one of the many measures – including Open Banking and overdraft text alerts – that we put in place to make banks work harder for their customers and help people shop around to find the best deals for them.

UK banks must now publish information on service quality every six months. Businesses, including Fintechs, will be able to access the underlying customer survey data through Open Banking. These organisations will be able to use the information to make sure people are better informed about what products and services are available and importantly, at what price.

In 2016, the CMA published a list of banking reforms that included the requirement of Open Banking. At that time, the CMA stated;

“… the older and larger banks, which still account for the large majority of the retail banking market, do not have to work hard enough to win and retain customers and it is difficult for new and smaller providers to attract customers….

In particular, we are requiring banks to allow their customers to share their own bank data securely with third parties using an open banking standard. This change, together with our other remedies, will help customers to find and access better value services and enable them to take more control of their finances. This will also enable new entrants and smaller providers to compete on a more level playing field and increase the opportunities for new business models to develop. “

The UK has seen a resurgence of new banks with many of them being online only. These Fintechs are not encumbered by legacy tech and a culture that is averse to change. The UK is widely viewed as a leader in Fintech innovation due in part to the competition mandates intrinsic to entities like the FCA.

Christopher Woolard, Executive Director of Strategy and Competition at the FCA, issued a statement on the banking reforms.

“Getting a good deal isn’t just about pricing. It’s also important for customers – including individuals and small businesses – to be able to judge the quality of service around their current account and to see whether other providers could offer something that suits them better. This information should encourage providers to offer the services that people value.”

The FCA mandated information from banks may be accessed here via APIs and website links.

The Retail Banking Investigation Report is available here.

Fintech: UK Financial Conduct Authority Initiates Consultation on Global Financial Innovation, Partners with 12 International Regulators

The UK Financial Conduct Authority (FCA) has initiated a new consultation that is going beyond the UK borders when it comes to Fintech innovation. Announced today, the FCA has created the Global Financial Innovation Network (GFIN). The multinational group includes regulatory agencies from the US, Singapore, Hong Kong, Australian, Canada and more.

FCA Director of Competition, Christopher Woolard, said the creation of GFIN is an important step for the FCA to be able to better understand and harness the benefits of innovation in financial services for consumers, while managing the potential harm.

“The establishment of the GFIN can help share the experiences and knowledge from across different markets, while also providing a platform for innovative firms wishing to scale their propositions via testing in multiple countries.”

The members as announced include:

  1. Abu Dhabi Global Market (ADGM),
  2. Autorité des marchés financiers (AMF)
  3. Australian Securities & Investments Commission (ASIC)
  4. Central Bank of Bahrain (CBB)
  5. Bureau of Consumer Financial Protection (BCFP, USA)
  6. Dubai Financial Services Authority (DFSA)
  7. Financial Conduct Authority (FCA, UK)
  8. Guernsey Financial Services Commission (GFSC)
  9. Hong Kong Monetary Authority (HKMA)
  10. Monetary Authority of Singapore (MAS)
  11. Ontario Securities Commission (OSC, Canada)
  12. Consultative Group to Assist the Poor (CGAP)

As described by the FCA, GFIN will seek to provide “a more efficient way for innovative firms to interact with regulators, helping them navigate between countries as they look to scale new ideas. It will also create a new framework for co-operation between financial services regulators on innovation related topics, sharing different experiences and approaches.”

[clickToTweet tweet=”#GFIN will seek to provide ‘a more efficient way for innovative firms to interact with regulators, helping them navigate between countries as they look to scale new ideas’ #Fintech” quote=”#GFIN will seek to provide ‘a more efficient way for innovative firms to interact with regulators, helping them navigate between countries as they look to scale new ideas’ #Fintech”]

The list of members incorporates most of the leading global regulators when it comes to embracing Fintech innovation with the glaring exception of the US Securities and Exchange Commission which is apparently not participating.

The consultation on GFIN has three main functions:

  • act as a network of regulators to collaborate and share experience of innovation in respective markets, including emerging technologies and business models;
  • provide a forum for joint policy work and discussions; and
  • provide firms with an environment in which to trial cross-border solutions.

As part of the exercise, GFIN will seek to draw up a shared mission statement to help guide the principles of the multi-lateral entity.

As financial services are becoming increasingly borderless and digitized, firms are having to manage a plethora of rules and regulations that inevitably add to the cost of services. Providing a vehicle that creates a forum to better align regulatory issues can be beneficial to both government agencies and consumers but this objective is clearly not without challenges.

The consultation document explains:

“The major emerging innovation trends within financial services are increasingly global, rather than domestic, in nature. For instance, big data, artificial intelligence (AI), and blockchain based solutions are being developed and deployed simultaneously in different financial markets. Since there is a general trend towards developing these digital solutions, now is a time to consider how to begin building new ways to share experience and manage the questions that emerge. Financial services regulators must re-consider existing ways of working and collaborating, in order to balance potential benefits of innovation (for consumers and the financial sector as a whole) with traditional policy objectives, namely financial stability, integrity, financial inclusion, competition and consumer wellbeing and protection.”

This most recent consultation follows a policy move in early 2018 where the FCA broached the concept of a “global sandbox” to better manage Fintech innovation. For that consultation, 50 responses were collected which expressed a “positive sentiment” towards more collaboration. Key themes within the feedback included:

  • Regulatory co-operation: providing an environment for regulators to collaborate on common challenges or policy questions firms face in different jurisdictions.
  • Regulatory engagement: a space where industry can engage with a broader group of regulatory stakeholders on a single topic or policy question.
  • Speed to international markets: could reduce the time it takes to bring ideas to international markets.
  • Governance: Must be transparent and fair to those potential companies wishing to apply for cross-border testing.
  • Emerging technologies/business models: A wide range of topics and subject matters were highlighted in the feedback, particularly those with notable cross-border application. Among areas highlighted were AI, distributed ledger technology, data protection, regulation of securities and Initial Coin Offerings (ICOs), know your customer (KYC) or anti- money laundering (AML), and green finance.

A meeting of global regulators took place in March of 2018 with some of the participants expressing their interest in moving forward with the GFIN concept.

The UK has been a leader in Fintech innovation and is frequently named as the gold standard in empowering financial entrepreneurs to test, and provide, new financial services. This leadership has been aided in part due to a principles based approach of compliance and a clear mission of enabling competition within financial services. In pursuit of these goals, the UK has already established numerous bilateral relationships with global regulators to create a bridge of engagement to fulfill mutually beneficial Fintech objectives.

The FCA is requesting feedback from the GFIN members by October 14, 2018. Feedback will be both formal and informal.

This coming fall, the FCA expects to be in a position to formally launch GFIN.

Download the consultation here.

The UK Financial Conduct Authority Looks to Update Rules for Loan Based Crowdfunding which is “Increasingly Complex,” Opens New Consultation

Investment Crowdfunding Rules Deemed Satisfactory.

The UK Financial Conduct Authority (FCA) has finally released its long awaited post-implementation review of crowdfunding regulation. As has been widely rumored for quite some time, the FCA is looking to adjust rules governing loan based crowdfunding, also labeled peer to peer lending, while leaving the equity side, a more simple business model, largely unchanged. The FCA states they are “largely content with the regulatory framework in place for investment based crowdfunding platforms.”

The FCA announced a new consultation regarding proposed changes stating the agency has observed an evolving sector of online lending with some loan based crowdfunding models becoming increasingly complex.

Additionally, the agency said they had witnessed some “poor business practices” in the P2P sector. While some P2P lenders have more robust controls in place others are deemed inadequate and in need of “significant improvements.”

Gillian Roche-Saunders, a partner at the law firm of Bates, Wells & Braithwaite in London and a leading regulatory consultant in the Fintech sector, had this to say about the FCA review;

“Today’s announcement shows a real u-turn from that very initial assumption in 2013 that P2P lending was the simpler of the regulated crowdfunding models. The FCA has truly looked under the bonnet of the industry and identified three sub-strata of lending platforms along with ancillary services that create very different experiences and risks for consumers. This will be the foundation of a much more sophisticated and targeted supervisory approach from the regulator.“

Christopher Woolard, who overseas the competition mandate at the FCA, issued a statement alongside the review;

“When we introduced new rules for crowdfunding, we said we’d review the market as it developed. We believe that loan-based crowdfunding can play a valuable role in providing finance to small businesses and individuals but it’s essential that regulation stays up to date as markets develop. The changes we’re proposing are about ensuring sustainable development of the market and appropriate consumer protections.”

As a regulator, the FCA is regarded as a sector leader when it comes to facilitating Fintech innovation. It’s light touch, principles based regulatory approach, has been a vital variable in the growth of online capital formation. The UK crowdfunding sector is, in many ways, the most robust in the world.

The FCA most recently completed a review of crowdfunding rules in 2016. At that time the agency stated;

“Our focus is ensuring that investor protections are appropriate for the risks in the crowdfunding sector while continuing to promote effective competition in the interests of consumers. Based on our findings to date, we believe it is necessary to strengthen investor protection in a number of areas. We plan to consult next year on new rules to address the issues we have identified.”

The delayed review by the FCA has been expected for quite some time with the expectation that peer to peer lending would receive targeted scrutiny.

As defined by the UK, crowdfunding takes two forms:

  • Loan-based crowdfunding – usually called peer-to-peer (P2P) lending. People and institutions use these types of platforms to lend money directly to consumers or businesses, to make a financial return from interest payments and the repayment of capital over time.
  • Investment-based crowdfunding – these are platforms where investors can invest directly in businesses by buying investments such as shares or debentures.

Breaking this down further, the FCA identifies three main categories:

  • Conduit Platforms – The investor picks the investment opportunities and the platform administors the loan or investment arrangement.
  • Pricing Platforms – The platform sets the price but the investor picks the underlying loan or investment
  • Discretionary Platforms – The platform sets the price and chooses the investor’s portfolio of loans to generate a target rate – this is only seen in the P2P sector.

The review document recognizes the differences between loan based and “investment-based” crowdfunding stating these differences have influenced their “calibration” of the regulatory framework. The FCA also acknowledges the importance of online capital formation but this benefit must be balanced with the intrinsic risk:

“Crowdfunding can be an important alternative source of finance for companies and consumers. The sector also provides an alternative investment opportunity for investors. However, investment through crowdfunding is not without risk, because of the exposure to the underlying asset that is created, and in some cases because of the complexity of the investments offered. Where such risks are not adequately managed or understood, harm to consumers and to market integrity can arise.”

Siting specific examples of concern, the FCA pointed to the following areas of loan based crowdfunding;

  • confidence and participation threatened by unacceptable conduct such as unreliable performance or by disorderly failure
  • buying unsuitable products
  • poor customer treatment
  • price too high or quality too low

An extreme example sited by the FCA is of a lender (investor) being exposed to opaque offerings, including a case where an investor was receiving less than 3% return on a loan generating 30% interest thus the platform was keeping 27% return. The FCA also states that some P2P loans are incorrectly priced where the interest rate paid is not being matched to the risk of the loan.

These concerns have heightened the FCA’s sensitivity to their investor protection mandate.

Proactive v. Reactive

The FCA says that losses and defaults within the P2P sector have been muted but caution that this sector of Fintech has “not been through a full economic cycle.”

“When economic conditions tighten, losses on loans and investments may increase. The sector has not yet been through such a tightening and so the resilience of the P2P business models observed remain relatively untested.”

The increasing complexity of the online lending sector requires additional risk management mandates, according to the FCA. The choice is to demand more stringent controls or for platforms to simplify their business model.

The UK Peer to Peer Finance Association (P2PFA), the representative organization for most of the leading P2P lenders, issued a statement in response to the review.

Paul Smee, current P2PFA Chair, said his Association has has always maintained that all investors lending through a peer-to-peer lending platform need to be clear about the performance of the platforms on which they invest.

“That is why P2PFA members have set out and signed up to Operating Principles which give a gold standard for disclosure. We are pleased that the FCA’s proposals endorse the idea of full disclosure,” stated Smee. “There is a lot of detail in this document, and we will be working through its implications, to ensure that the eventual regime is practical, proportionate and allows for the development of a healthy and competitive market in peer-to-peer lending. Peer-to-peer lending needs to make its full contribution to the growth of the UK economy and we will be working to ensure that new regulatory requirements do not get in the way.”

While the P2PFA has set a high standard of operation for its members, not all UK platforms have agreed to these principles and joined the group. Additionally, the P2PFA welcomed the need for transparency and disclosure along with wind down plans for platforms.

The investment crowdfunding sector, frequently called equity-based, came away with a fairly positive review. Luke Lang, co-founder of Crowdcube issued the following statement;

“After comprehensive consultation with the industry, the FCA has made the right call in finding that the existing regulatory framework for investment-based crowdfunding platforms is fit for purpose.”

The UK investment crowdfunding segment has endured little fraud since the sector became a regulated sector of finance.

The proposed changes by the FCA seek to adapt the ways in which the loan-based crowdfunding model has morphed during the past few years. The proposals include:

  • Proposals to ensure investors receive clear and accurate information about a potential investment and understand the risks involved
  • Ensure investors are adequately remunerated for the risk they are taking
  • Transparent and robust systems for assessing the risk, value and price of loans, and fair/transparent charges to investors
  • Promote good governance and orderly business practices
  • Proposals to extend existing marketing restrictions for investment-based crowdfunding platforms to loan-based platforms

Julia Groves, Partner and Head of Crowdfunding at Downing LLP – and former Chair of the UKCFA, welcomed the FCA’s decision to carry out a further consultation as helpful to sector growth. She said this was indicative of the agencies commitment to instilling greater transparency and accessibility – something Downing Crowd has been calling for.

“It’s unsurprising to us that the FCA review is clearly focused more on the loan-based area of the market (P2P lending), given the lower levels of disclosure and the lack of transparency offered by some P2P platforms … But to survive in the mainstream, the industry needs to help both investors and their advisers understand where the different types of crowdfunding sit on the risk scale compared to other traditional investments,” shared Groves.

The FCA is requesting feedback to the consultation by 27 October 2018 before publishing rules in a Policy Statement later this year. The review is a must read for regulators and industry participants around the world.

See below.


The FCA review:  Loan-based (peer to peer) and investment based crowdfunding platforms: Feedback on our post implementation review and proposed changes to the regulatory framework.


Questions in the FCA paper

  • Q1:  Do you have any comments on our assessment of the equality and diversity considerations?
  • Q2:  Do you have any comments on the description of the business models in this section?
  • Q3:  Do you have any comments on the analysis of harm in this section?
  • Q4:  Do you agree with our proposals to make clearer that P2P platforms that set the price of a loan must have an enhanced risk management framework that as a minimum, allows the platform to;

a)  gather sufficient information about the borrower to be able to competently assess the borrower’s credit risk,
b)  categorise borrowers by their credit risk in a systematic and structured way, and
c)  price the loan so it adequately and fairly reflects the credit risk determined in a)? If not, please explain why.

  • Q5:  What else do you think might be needed to ensure an appropriate risk management framework for a P2P platform that sets the price of a loan?
  • Q6:  Do you agree that when choosing P2P agreements on behalf of the investor, the platform must only facilitate those that are in line with the risk parameters advertised to the investor?
  • Q7:  Do you agree with our proposals that P2P platforms that offer a target rate of return must be able to determine, with reasonable confidence, that a portfolio will generate the advertised target rate? If you do not agree, please explain why.
  • Q8:  Do you agree that this means only exposing investors to loans that a platform has determined, with reasonable confidence, will contribute to achieving the advertised target rate of return and, that at the time of investment fall within the risk parameters first advertised to the investor? If you do not agree, please explain why.
  • Q9:  Do you agree that a P2P platform’s risk management framework must be adequate to assess price and value over time, ie for newly originated and, for example, for loans that have defaulted? If you do not agree, please explain why.
  • Q10:  Is the high-level approach proposed the right one to allow the industry flexibility but ensure good standards? What else do you think might be needed to ensure an appropriate risk management framework for a P2P platform that chooses P2P agreements on behalf of investors?
  • Q11:  Do you agree with our proposals that P2P platforms should have an independent compliance function and, depending on the nature, scale and complexity of its business, platforms should have independent risk and internal audit functions?
  • Q12:  Do you agree with our proposals that P2P platforms that have risk management frameworks should allocate responsibility for the development and oversight of that framework to a person approved to hold a significant influence function, such as a director?
  • Q13:  Do you agree with our proposals to apply marketing restrictions to P2P platforms? If not, please explain why.
  • Q14:  Do you agree with the proposed modification to the systems and controls rules regarding wind-down arrangements? If not, please explain why.
  • Q15:  Do you agree that P2P platforms must have a P2P resolution manual containing information that would assist in resolving the firm in the event of the firm’s insolvency?
  • Q16:  Have we correctly identified the information that should be included in the P2P resolution manual? If not, what other information should be included?
  • Q17:  Do you think additional prudential requirements are needed, to provide for the availability of ring-fenced capital in the event of platform failure? To ensure that loans continue to be managed and administered during wind-down?
  • Q18:  Do you agree with our proposals to clarify the information that a P2P platform should provide regarding its role?
  • Q19: Do you agree with our proposals to make rules requiring a P2P platform to disclose its wind-down arrangements and to warn investors/prospective investors of the risk to their P2P agreements should the platform fail?
  • Q20: Do you agree with our proposals for additional requirements for disclosure of investment information to investors? Is there any additional information that platforms should be required to give to investors? If you disagree with our proposals, please explain why.
  • Q21: Although not proposed in this CP we invite feedback on whether it would be helpful to consumers and industry to have a standard format for P2P disclosures about the services they provide and investment opportunities?
  • Q22: Do you agree with standardising the definition of default? If so, do you agree with the proposed definition? If not, please explain why.
  • Q23: Do you agree with our proposals to require disclosure of information about contingency funds? If not, please explain why.
  • Q24: Are there other measures that we should consider to address the harm that can arise from contingency funds obscuring underlying risk to investors, or from investors mistakenly believing a contingency fund provides a guaranteed rate of return on loans (similar to a fixed rate savings account)?
  • Q25: Do you agree with our proposal for a six 6-month commencement period? If not, please explain why.
  • Q26: Do you agree with our proposal to apply MCOB 11 to platforms facilitating home finance products, where one or more of the investors is not an authorised home finance provider? If not, what amendments would you suggest?
  • Q27: Do you agree with our proposal to apply MCOB 13 to platforms facilitating home finance products, where one or more of the investors is not an authorised home finance provider? If not, what amendments would you suggest?
  • Q28: Do you agree with our proposal to apply offer stage and post-contractual disclosure rules to platforms facilitating home finance products, where one or more of the investors is not an authorised home finance provider? If not, what amendments would you suggest?
  • Q29:  Do you agree with our proposed changes to pre- contractual disclosure rules for platforms facilitating home finance products, where at least one of the investors is not an authorised home finance provider? If not, what amendments do you suggest?
  • Q30:  Do you agree with our proposal to apply other MCOB rules to platforms facilitating home finance products, where one or more of the investors is not an authorised home finance provider? If not, what amendments do you suggest?
  • Q31:  Do you agree with our proposal to apply our data reporting rules to platforms facilitating home finance products, where one or more of the investors is not an authorised home finance provider? If not, what amendments do you suggest?
  • Q32:  Do you have any comments on the application of our other (ie not MCOB) rules to platforms facilitating home finance products, where one or more of the investors is not an authorised home finance provider?
  • Q33:  Do you have any comments on our cost benefit analysis for the proposals arising from the post-implementation review?
  • Q34:  Do you have any comments on our cost benefit analysis for the P2P mortgage and home finance proposals?


Fintech Sandbox: FCA Announces 29 Firms for Fourth Cohort for Innovative Regulatory Process

The UK Financial Conduct Authority (FCA) has posted the 29 firms that will be part of the fourth cohort of the Fintech sandbox.

The UK was the trailblazing regulatory agency that first created an environment where innovative financial firms could safely experiment with new services without running afoul of existing rules and with the guidance of the regulator. Since the UK Fintech Sandbox launched many international financial regulators have followed suit creating their own, similar Sanbox ecosystem.

The FCA has a strategic objective of ensuring the relevant markets function well. To support this, it has three operational objectives: to secure an appropriate degree of protection for consumers; to protect and enhance the integrity of the UK financial system; and to promote effective competition in the interests of consumers.

Since 2014, the UK Fintech Sandbox has seen over 1,200 applications and has supported more than 500 firms. This round saw 69 applications – an increase on the number of applications to cohort three.

Christopher Woolard, Executive Director of Strategy and Competition at the FCA, said he was pleased to see the largest Sanbox cohort to date and a record number of applications;

“Cohort 4 has seen a large increase in the number of firms testing wholesale propositions including firms that are aiming to increase the efficiency of the capital-raising process. Alongside these we can see significant use of distributed ledger technology (DLT), some experimentation with cryptoassets which will help inform our policy work and propositions aimed at helping lower income consumers.”

The FCA said that Cohort 4 has eight firms (27%) in the wholesale sector. Five large firm tests will be conducted in cohort 4; the largest number to date.

Over 40% of companies accepted to cohort four are using blockchain of DLT. Of these, six are using DLT to automate the issuance of debt or equity. Two are using DLT to support the provision of insurance. Other technology applied includes geo-location technology, use of Application Programming Interfaces (APIs) and artificial intelligence.

[easy-tweet tweet=”Over 40% of companies accepted to cohort four of the UK #Fintech Sandbox are using #blockchain or #DLT. Of these, six are using DLT to automate the issuance of debt or equity. Two are using DLT to support the provision of insurance” template=”light”]

The FCA pointed to the fact they have accepted a number of firms that will be testing propositions relating to crypto-assets. The agency said they are “keen to explore whether, in a controlled environment, consumer benefits can be delivered while effectively managing the associated risks.”

The current cohort is listed below with one firm requesting to remain anonymous. The application window for cohort 5 of the regulatory sandbox will open later this year.

Cohort 4 firms

BlockEx – Platform that facilitates the issuance and manages the lifecycle of regulated bonds using DLT.

Capexmove – DLT-based solution for issuing tokenised debt. Capexmove uses smart contracts to make debt financing more efficient.

Chasing Returns – Psychology based risk platform that promotes good money management discipline and improves outcomes for customers that trade Contracts for Difference (CfDs). It acts like a digital coach, encouraging adherence to money management and risk exposure levels.

Community First Credit Union – Initiative to facilitate creation of an identity token that supports customers who lack traditional forms of ID, in order to assist them in accessing bank account services in the UK.

Creativity Software – Regtech solution that supports regulated activities in the UK to achieve more secure customer authentication via mobile phone network based geolocation services. The intention is to draw on geolocation technology to protect UK bank customers from fraud and crime.

CreditSCRIPT – Investment platform that gives professional and institutional investors access to a wide range of online lending markets through a single access point. Investors will be able to gain exposure to consumer, SME and real estate loans via CreditSCRIPT.

Dashly – Fully autonomous, ‘always-on’ mortgage advice platform that continuously tracks and compares a borrower’s existing mortgage, alerting them the moment it pays to switch.

Etherisc – Service that uses smart contracts on a blockchain to provide fully automated, decentralised flight delay insurance.

Fineqia – Blockchain based digital platform that enables companies to issue and administer debt and equity securities, including bonds backed by cryptoassets.

Fractal – Insights platform using distributed ledger and artificial intelligence technology to power SME financing by digitising credit applications and connecting loan issuances to the underlying financial data.

Globacap – Capital raising platform for SMEs and institutional investors which facilitates the issuance process of debt and equity securities. Globacap use DLT to simplify and streamline the issuance process.

Hub85 – Fully-automated governance solution that enables financial institutions to monitor and understand how spreadsheets are used for regulated activities. The software monitors and enforces compliance rules, identifies structural file errors and quantifies enterprise risks. Analytics captured can be used to identify and expedite the automation of operational tasks.

London Media Exchange – Platform that facilitates the buying and selling of contracts for digital advertising space. In the short term this will improve transparency for market participants, and in the long term will lead to the development of derivatives.

Meet Mia – Chatbot on Facebook Messenger that allows customers to buy and manage travel insurance. Policies are written in plain English and customers can ‘ask’ the chatbot what they are covered for. Group discounts and automated claims handling will also be available.

Mettle – Current account which helps small business owners make decisions, with forward looking finances, smart invoices and easy receipts.

Mortgage Kart – Automated-advice offering to help customers pick the most suitable mortgage given their needs and circumstances.

Multiply – Service that combines financial modelling and machine learning to provide holistic financial plans with specific product recommendations directly to consumers.

Natwest – Governance model based on DLT that enables organisations to work collaboratively on developing and running decentralised applications. The model  codifies society rules in smart contracts on a blockchain creating a digital mutual. NatWest will open source the code after successful testing.

NorthRow – Service that enhances KYC, client onboarding and monitoring processes using account data to support identity verification and financial suitability.

Salary Finance – Payroll linked lending platform which provides consumers with access to their earned income by the day or week. By enabling employees to access their earned income more frequently, they will be better able to manage their budget, address unexpected needs or avoid ‘late payment fees’ of existing commitments.

Token Market –Funding platform that uses DLT to facilitate the issuance of shares in private companies more efficiently.

Tokencard – Service that connects a centralised payment card to a decentralised blockchain. Consumers hold their own assets in a decentralised Smart Contract wallet and top up their card through simple exchange.

Universal Tokens – Service that leverages blockchain technology in the distribution of insurance products to increase trust and improve user experience.

Veridu Labs – Privacy-driven KYC and AML solution backed by machine learning and network analyses to facilitate onboarding and access to business banking.

World Reserve Trust – Service that facilitates cheaper and faster global trade payments and settlement using the Sīlùbì, an asset-linked smart token that utilises a permissioned DLT network.

Zippen – Service that enables individuals to transfer and consolidate (hence ‘zip’) their pensions (‘zip-pen’) all in one place, delivering convenience, financial advantage or both.

1825 (part of the Standard Life group) – Automated advice proposition for consumers that are close to retirement. Plans are generated by an automated advice engine that considers how to meet the needs and aspirations of consumers using their available liquid and illiquid assets.

20|30 – DLT-based platform that allows companies to raise capital in a more efficient and streamlined way. The test will be facilitated in conjunction with the London Stock Exchange Group ad Nivaura.

More Fintech Please: FCA Says Mortgage Industry in Need of Innovation

The Financial Conduct Authority (FCA) has published an interim report on UK mortgage market. According to the FCA, Mortgage debt accounts for over 80% of total UK household liabilities – so this is a significant sector of finance that has a profound impact on individuals.

While the FCA found that competition was effective for providing home financing, the sector of finance could do with a bit more innovation;

“The mortgage market is one of the largest financial markets in the UK and there have been significant changes to the market since the financial crisis in order to ensure that we do not return to the poor practices of the past,” stated Christopher Woolard, Executive Director of Strategy and Competition at the FCA. “For many, the market is working well with high levels of consumer engagement. However, we believe that things could work better with more innovative tools to help consumers. There are also a number of long-standing borrowers that have kept up-to-date with their mortgage repayments but are unable to get a new mortgage deal; we want to explore ways that we, and the industry, can help them.”

The FCA’s initial findings indicate there are impediments to shopping around and about 30% of customers fail to find the cheapest mortgage. Switching is a significant hurdle as well

The FCA is looking at removing potential barriers to innovation in the sale of mortgages, including those due to aspects of FCA advice rules and guidance. The regulator wants to make it easier for consumers to evaluate different options while making it simpler to switch if there is a better deal.

The FCA says it has sought to identify opportunities for technology to improve how the market works. By combining competition, proportionate regulation empower, and technology, consumers may be able to make a better decision in financing their homes.

This report is interim in nature with a final report due at the end of the year. The interim report contains a series of questions for stakeholders to respond to. The deadline for feedback is the 31st July 2018.

Download report below.

[pdf-embedder url=”” title=”FCA Mortgage Market Study Interim Report ms16-2-2-interim-report”]


Christopher Woolard, FCA Director of Competition: Regulators Must Work Together to Foster Fintech Innovation

Christopher Woolard, the UK’s Financial Conduct Authority  Executive Director of Strategy and Competition, delivered a keynote speech today at the Innovate Finance Global Summit. Woolard is the defender and champion of the vital competition mandate that has made the FCA a successful financial regulator.  Woolard states that a traditional regulators point of view is to ask the question what is the risk? Today, this approach has changed to “what is the risk of not doing this?” This important difference has helped to make the UK the leading Fintech innovation hub – globally.

In Woolard’s keynote he tackles an important aspect of Fintech. It is a global revolution yet regulatory structures are national. What Fintech needs to thrive and grow further faster, is a global approach. A harmonized structure to benefit of all nations.

So can the FCA use a global sandbox to tackle the questions of the international community?

The answer may be clear but the challenge is immense. Not all regulators have taken an enlightened approach to enabling Fintech innovation by accepting certain risks to foster competition and change.

The UK cannot do this unilaterally and Woolard recognizes the hurdle.  But finance is global by nature  and it “only makes sense that we tackle the challenges of our age together.”

The speech is republished below.

Christopher Woolard, FCA’s Executive Director of Strategy and Competition, keynote speech at Innovate Finance 2018

Traditional regulator’s standpoint of ‘what is the risk?’ to asking ‘what is the risk of not doing this?’


Thank you for inviting me to speak here today.

FinTech is one of those industries that we can genuinely call a global community.

The international dimension of FinTech is inextricable from its success as a sector.

And for the FCA as a regulator, the degree to which we seek to work with international colleagues is a defining feature of our work in this space.

In previous years, I’ve had the opportunity to talk here about our innovation work and the launch of our regulatory sandbox. We have worked with over 500 firms through FCA Innovate and around 70 in depth in our sandbox.

This has been one of the largest and most complex regulatory sandboxes in the world, involving firms from Singapore, the US and South Africa, amongst other countries.

So, as we look to the next stage of our innovation journey, it is only natural that international cooperation should be a key part of the picture.

Today I’d like to talk about this vision and the role that the FCA will play in it.

From then, to now

As many here will know, our innovation story began in 2014 with the launch of Project Innovate.

The purpose of Innovate was and remains to help firms tackle regulatory barriers to innovation, be it through clarifying regulatory expectations, examining our own rules or enacting policy changes, to give them space to innovate in the interest of consumers.

Central to this is our regulatory sandbox, a ‘safe space’ where businesses can test innovative products, services, business models and delivery mechanisms in the real market, with real consumers.

We were the first regulator to attempt a project of this type.

And in order to make it work we had to change perceptions about the role of the regulator – for both firms and ourselves.

We had a big job to do to ensure firms found us easy to work with and knowledgeable about the challenges they face in bringing new products to market.

The shift in mindset that was required was significant too: from the traditional regulator’s standpoint of ‘what is the risk?’ to asking ‘what is the risk of not doing this?’

And when we asked ourselves that question we found that the risk of not opening up markets to innovation was bigger than the risk of taking that leap.

The sandbox has been as much an experiment for us as it is for the firms themselves. But, I have to say, for a calculated risk, this bet has really paid off.

Since we launched the sandbox in 2016 we have supported firms in reducing the time and cost of getting innovative ideas to market.

In fact, 90% of firms from our first round of applications have gone on to market, with many firms finding it easier to get funding as a result of participating in the sandbox.

We’ve seen take-up by large firms as well as start-ups, who may not have had the confidence to try new approaches without the security of the sandbox.

And through sandbox firms being closely supervised in their test phase we’ve learnt an enormous amount about how new technologies are being applied.

So we know this approach is working. The question is, is it enough?

Over the last couple of years, we’ve seen a trend emerge which has become impossible to ignore.

Increasingly we’re hearing from firms a demand to operate globally, to grow at real scale and pace.

This would involve working with other regulators across the globe to conduct tests at the same time.

Through the sandbox we’ve seen 30 applications from international firms and have gone on to support 11 of them – many of which are also in other countries’ innovation programmes.

It’s clear which way the wind is blowing.

Nor is international collaboration around FinTech new to us. Over the last few years, we’ve signed ten cooperation agreements with eight different jurisdictions, allowing us to share market trends, collaborate on projects and refer innovative firms across markets.

But currently there is no joint sandbox programme with other regulators for firms to participate in.

Such a project represents new territory.

Breaking new ground requires an element of risk, not something, as I’ve said, that regulators are generally comfortable with.

But our whole history with Innovate has been about doing things that regulators historically haven’t done.

To face those risks, we have to ensure we have the right controls, all the while bearing in mind the risk of not acting.

So we’re up for the challenge.

Naturally, though, we want to do our homework.

That’s why last month we invited stakeholders to share their views on what a global sandbox could look like.

The responses – from regulators to start-ups, challengers to large firms, trade bodies to think tanks – make for fascinating reading.

As expected, there is lots of interest in the idea of cross-border testing.

In the benefits this could bring, such as reducing cost and complexity, and accelerating expansion into other jurisdictions – especially for smaller firms who are keen to expand internationally.

In terms of the jurisdictions that respondents are keen to see included, the US featured high up the list. South America, Australia, Hong Kong, Singapore and Europe also made an appearance.

African countries, like South Africa and Kenya, also featured in a number of responses. This should come as no surprise when you consider how new models of banking have grown up there.

When it came to how a global sandbox might work in practice we saw some really creative suggestions coming through – from a ‘global dictionary’ which covers data needs across different countries to a joint mission statement from participating regulators with agreed criteria and consumer safeguards.

And overseeing it all, it was suggested, could be a ‘college of regulators’ – a consortium of representatives from participating regulators, something that corresponds with our own thinking.

So, what do we think?

1. We should be practical.

Establishing a global sandbox is an immense undertaking and we have to be realistic about the task at hand.

In some quarters, there could be an aspiration for global standards. The logic is clearly there, but my strong suspicion is that it would take twenty years to negotiate and in a fast-moving market would be nineteen years and six months out of date when we got there.

2. We should work with and through international bodies where we can – we are already working closely with international colleagues in IOSCO, for example.

To avoid running before we can walk, we might want to start with those jurisdictions which already have established sandboxes or innovation hubs.

3. The model should allow some room for us to experiment with what works. So we could see a range of sandbox tests. For example, a single test in one country collecting data for multiple interested regulators. Or simultaneous testing in more than one country.

4. The membership should be flexible. We should not assume that all regulators would be engaged in every test, although we should, of course, share knowledge and learning widely.

5. Most of all – the key to all of this is collaboration – this has to be a joint effort across international regulators, not a UK global sandbox.

Because, clearly, we can’t do this alone. While we may be the ones kicking off the discussion, we won’t have much success if we’re just talking to ourselves.

So now is the time to bring fellow regulators around the world into the conversation.

In fact, collaboration will run through the next chapter of the UK’s FinTech story like a stick of rock.

Later this week we start work with interested regulators, including colleagues across Europe, the US and Far East, on a blueprint.

So there’s real momentum behind this and we hope that before long the ambition of a global sandbox will be a reality.

Global problems, global solutions

Now, participating in a global sandbox would represent a truly momentous step forward in the UK’s FinTech journey.

But we think it could do a lot more than just allow innovators to test their ideas. One option we want to explore is the power of this sandbox to solve global problems.

In my conversations with colleagues I hear them grappling with many of the same challenges as us, whether they’re from Sydney or Singapore.

Can we use the global sandbox to tackle the questions occupying the minds of the international community, questions which have potentially huge ramifications for financial services and beyond?

I want to give two examples.

The anti-money laundering effort – after all, controls can’t be effective if there’s fragmentation.

This is an area where we all have skin in the game.

The UN estimates the full global scale of money laundering to be $1.6 trillion annually. It’s in all our interests to apply our joint expertise globally in tackling it.

That’s why, in May, we will be bringing together international partners from the US, Europe, Australia, Japan and Korea in a TechSprint which will focus specifically on developing solutions to the challenges of money laundering, financial crime and terrorist financing.

This will be the fifth TechSprint we’ve held.

These events draw on the skills of software developers, data scientists and subject matter experts. We work together in cross-industry groups to develop real, tangible solutions to critical problems in financial services.

And they create real results.

From previous techsprints we’ve seen commercial partnerships established between and several large banks will take regulatory reporting into a production environment.

Our ambition for the AML event is that it serves as a first step in establishing a deep international dialogue around the role of technology in tackling money laundering and criminal finance.

So we see each TechSprint as a real catalyst for change, not just a talking shop.

Computer says yes

For my second example I want to move from the economic and criminal burden of money laundering, to the regulatory burden of compliance.

This, the accuracy of regulatory reporting, and the resource and time taken to achieve it, is another field where our paths cross with those of international regulators.

Monitoring misconduct can be like trying to find a needle in a haystack – no matter which jurisdiction you’re operating in.

But the advances of the last few years have opened up a whole new world of possibilities, which could see the regulatory burden become more effective and the costs shrink considerably.

One area where this could be applied to great effect is around the way firms interpret our regulatory requirements.

What if, requirements could be expressed in a language that could be understood by machines? Not for everything, but for many reporting requirements.

We know that the technology exists.

At our TechSprint on regulatory reporting last year, we saw for ourselves that it is possible to take a regulatory requirement contained in our handbook and turn it into a language that a machine can understand. And from that language, machines can respond to the requirement by effectively pulling the necessary information direct from the firm. Not in months, but in seconds. In our sprint, 12 seconds to be precise.

The potential benefits of this are huge.

If regulatory requirements can be executed by machines, a firm’s compliance with that obligation will be more consistent, meaning we receive more timely, better quality data.

It also means that firms’ implementation of our rules would be faster and more efficient, significantly reducing costs but without diminishing the benefits for markets or consumers.

We can’t get ahead of ourselves here.

What we tested end to end at the TechSprint was a very narrow example of this and we can’t flick a switch and suddenly have a regulatory regime which is entirely based on machine executable rules.

But what we are exploring, is could we implement a new requirement using this method. We will be conducting further research on this over the next few months and hope to start to be able to put this into practice beyond that.


Three and half years after we launched Project Innovate and our belief in the transformative role of technology in improving outcomes for consumers has not wavered.

In fact, our ambitions are greater than ever before.

The opportunities are there for the taking – and we are poised to reach out and grab them with both hands.

But we can’t do it alone.

Finance is a truly global sector and it only makes sense that we tackle the challenges of our age together.

So fostering innovation and collaboration will be absolutely central to what we do next. And we hope you’ll join us on the next stage of the journey.

Moving Forward with Regtech: FCA Calls for Input to Achieve Smarter Regulatory Reporting

The UK Financial Conduct Authority (FCA) has published a call for input as to how technology can make things easier for firms to meet their regulatory reporting requirements. Incorporating Regtech can also streamline the process for the regulator while improving the overall quality of the information provided. All regulated firms submit data to the FCA based on their financial activities. These regulatory reports are critical to their ability to deliver effective supervision, monitor markets and detect financial crime.

Christopher Woolard, FCA’s Executive Director of Strategy and Competition, said that tech is a powerful shaper of financial regulation;

“Our TechSprints bring people from across the financial services world together to share their collective knowledge to solve common problems. We look forward to working with industry participants in the coming months to drive these ideas forward.”

The FCA said that it regularly explores how tech ca help reduce the regulatory burden and one of the methods is via a “TechSprint” that bring together financial services providers, technology companies and subject matter experts to develop solutions to regulatory challenges.

In November 2017, the FCA and the Bank of England, held a two-week TechSprint to examine how technology can make the current system of regulatory reporting more accurate, efficient and consistent.

At the TechSprint, the FCA reports that participants successfully developed a “proof of concept” which could make regulatory reporting requirements machine-readable and executable.  This means that firms could map the reporting requirements directly to the data that they hold, creating the potential for automated, straight-through processing of regulatory returns.

Every year the FCA says it receives over 500,000 scheduled regulatory reports from firms, as well as additional ad hoc reports. Clearly, this is a process that can benefit from further automation.

The Call for Input asks for views on how the FCA can improve this process. Parties may submit feedback until 20 June 2018. The FCA expects to publish the feedback later this summer.

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UK Financial Conduct Authority Publishes Feedback Statement on Blockchain

The UK Financial Conduct Authority (FCA) has published a feedback statement on distributed ledger technology (DLT) or Blockchain.  The document comes following an earlier discussion paper published in April designed to commence a dialogue between interested parties and the regulator. The FCA has now responded to received feedback.

Christopher Woolard, Executive Director of Strategy and Competition at the FCA, commented on the report;

“The original paper opened a discussion about DLT and the volume and breadth of responses we received from the industry demonstrates the significance of this issue. DLT has the potential to transform practices across a number of markets, sharpening competition and improving risk management. At the same time we have to be alive to the risks of certain applications of it. We will continue to work with a range of agencies and firms to ensure a co-ordinated approach to the use of DLT in financial services.”

[clickToTweet tweet=”DLT has the potential to transform practices sharpening competition & improving risk management #Blockchain” quote=”DLT has the potential to transform practices sharpening competition & improving risk management #Blockchain”]

The FCA received 47 responses including comments from regulated firms, national and international trade associations, technology providers, law firms and consultancies.

Respondents to the FCA request for feedback expressed support for the FCA maintaining a ‘technology-neutral’ approach to regulation and welcomed the FCA’s open and proactive approach to new technology, including their Fintech Sandbox and Regtech initiatives.  All respondents suggested benefits and risks of using permissionless and permissioned DLT networks in financial services, contingent upon specific services.  Most respondents were particularly interested in the use of DLT in the capital markets sector, for example underpinning market trading infrastructure, including the use of smart contracts. DLT holds the potential to substantially reduce costs for firms and regulators alike.

The FCA does not regulated cryptocurrencies but said they are monitoring the market. The regulator said the size of the market is not indicative of any system risk, at least for now.

The FCA said it would continue to monitor DLT-related market developments, and keep its rules and guidance under review in the light of those developments. At an international level, the FCA will work closely with national and international regulatory bodies to shape regulatory developments and standards.

Regarding the hot Initial Coin Offering market, the FCA is currently gathering evidence and is conducting a deeper examination of the market.

On the Initial Coin Offering (ICO) market, the FCA will gather further evidence and conduct a deeper examination of the fast-paced developments. Many respondents in the technology community considered ICOs as having the potential to boost the development of the broader DLT ecosystem while others raised concerns about risk. A “well functioning” ICO market must be aware of the regulatory obligations.

While stressing the potential for fraud, the FCA said that a number of ICOs have engaged with the FCA Innovation Hub and is open to economic benefits provided by this new digital asset class.

The next steps for the FCA may be summed up in their approach to observe, engage and collaborate.

The report is embedded below.

[pdf-embedder url=”” title=”FCA Statement on Distributed Ledger Technology fs17-04″]


Lessons Learned: UK FCA Shares Insight into Fintech Sandbox Operation After First Year

Following the first full year of operations of the Fintech Sandbox, the UK Financial Conduct Authority (FCA) has published a report outlining lessons learned. The UK has been the trailblazer in the concept of creating a regulatory sandbox to allow innovative financial firms to work closely with regulators on business models prior to being released live into the wild. The sandbox was effectively established to support the FCA’s objective of promoting effective competition in the interests of consumers but also allows the regulators to grow and learn.

Since financial services are a highly regulated industry it can be difficult for startups to enter the space. The Fintech Sandbox can help level the playing field by smoothing over regulatory hurdles in a safe environment. Innovative services may be delivered quicker to market thus benefiting consumers and businesses.

Christopher Woolard, the FCA’s competition guru, said the Sandbox was a first worldwide and it has been met with impressive demand from innovators;

“We have seen tests across the full range of sectors that we regulate and I’m pleased that the majority of firms that have tested products in the sandbox have gone on to take their innovation to market. It is important that we continue to evaluate the success of our interventions so that we can identify areas where improvements can be made to help both firms testing and ultimately the consumers they are serving.”

The FCA sandbox opened for applications in June 2016.  Since then, the FCA has received 146 sandbox applications. Of these, 50 were accepted and 41 progressed to testing which has been run in two cohorts.

The findings of the first year of the Fintech Sandbox are described by the report as follows:

  • The sandbox has helped reduce the time and cost of getting innovative ideas to market
  • Around 90% of firms that completed testing in the first cohort have progressed towards a wider market launch.
  • Testing in the sandbox has helped facilitate access to finance for innovators
  • Testing in the sandbox can help firms access funding by providing more certainty to prospective partners and investors. At least 40% of firms which tested in the first cohort of the sandbox received investment either during or following their sandbox tests.
  • The sandbox has enabled products to be tested and introduced to the market
  • Firms have used sandbox tests to assess commercial viability and how receptive consumers are to pricing strategies, communication channels, business models and the technologies themselves.

The report also highlights some of the challenges faced by firms in conducting their tests within the sandbox. These include accessing banking services and smaller firms struggling to acquire customers to take part in their tests.

While the FCA said it was too early to draw profound conclusions on the Fintech Sandbox, the first year of operations has been encouraging. Global regulators keen on boosting Fintech innovation will be reading this report with interest.

The FCA said it will use the insights outlined in the report to inform future sandbox developments and will continue to feed them into its broader regulatory work, including policymaking and supervisory activities.

Download the FCA Fintech Sandbox report here.


Insurtech: FCA & Hong Kong Insurance Authority to Cooperate on Fintech

The Financial Conduct Authority (FCA) has entered into a co-operation agreement with the Hong Kong Insurance Authority (IA) designed to enhance collaboration in supporting Fintech innovation.  The FCA explains the agreement includes information sharing and mutual referrals of Fintech firms looking to enter into either market.

The principle role of the IA is to tegulate and supervise the insurance industry for the promotion of the general stability of the insurance industry and for the protection of existing and potential policy holders.

Christopher Woolard, Executive Director of Strategy and Competition at the FCA, said that by working together regulators can boost innovations in Fintech;

“We look forward to working closely with the IA to promote innovation and enhance synergy for both markets, which will in turn benefit our consumers and financial industry as a whole,” said Woolard.

John Leung, Chief Executive Officer of the IA, said the agreement would foster Fintech development globally and help Fintech firms expand beyond their home jurisdiction.

“The IA will consider signing similar cooperation agreements with insurance regulators in other jurisdictions,” added Leung.

The FCA has concluded similar agreements with the Hong Kong Monetary Authority and the Securities and Futures Commission, to provide a full spectrum of co-operation and assistance in Fintech innovation in the banking, securities and insurance sectors in both the UK and Hong Kong markets. The FCA has been at the forefront of establishing bilateral agreements around the world with the intent of aiding cooperation and promoting innovation in financial services.

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FCA Publishes PSD2 Approach

The UK Financial Conduct Authority (FCA) has published their approach to the EU directive known as PSD2.  This directive defines the requirements for firms that provide payment services and impacts a wide range of financial service firms including Fintechs. PSD2 ostensibly aims to improve consumer protection, make payments safer and more secure, and drive down the costs of payment services. The FCA states the new regime will be in force from 13 January 2018. In the UK PSD2 is largely implemented through the Payment Services Regulations 2017, which HM Treasury published.  PSD2 was published in the European Union’s (EU) Official Journal on 23 December 2015. The full text of the PSD2 can be found on the EU’s website.

Additionally, more services will be brought within the FCA’s scope by PSD2. These include account aggregation services which aim to help consumers manage their finances by bringing all of their bank account data together in one place, and services that allow consumers to make payments in different ways online, without using a credit or debit card.

Christopher Woolard, Executive Director of Strategy and Competition at the FCA, commented that competition in retail banking and payments is vital for the wider economy;

“PSD2 builds on this by giving consumers more choice around how they manage their payments and bank accounts. It also brings in some important protections for consumers and seeks to increase the security of payments,” said Woolard. “Firms should make sure they know what’s required of them to be ready for the new regime. We will continue to monitor closely whether competition in the market improves in the interests of consumers.”

PSD2 also introduces a number of new requirements around how firms treat their customers and handle their complaints, and the data they must report to the FCA.

All existing payment firms must be re-authorized. The FCA said that firms should consider whether they now need to seek authorization or registration because of changes to the scope of regulation made by PSD2. This includes businesses providing account aggregation or online payment initiation services. The FCA said applications will open on 13th October.

The FCA document, which is 238 pages long, is embedded below.

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FCA Provides Details on Scope of Investment Platforms Market Study

The Financial Conduct Authority (FCA) has published the Terms of Reference regarding the Investment Platforms Market Study. The document will be used as a guide in the FCA review of platform. For the purposes of this study the FCA defines “platforms” broadly. The study is said to look at both investment platforms and firms that provide similar services by allowing investors or their advisers to access retail investment products through an online portal.

Christopher Woolard, Executive Director of Strategy and Competition at the FCA, said the increasing use of platforms and the issues raised by their previous work has compelled the FCA to assess if competition between platforms is working in the best interest of consumers;

“Platforms have the potential to generate significant benefits for consumers and we want to ensure consumers are receiving these benefits in practice,” said Woolard.

The FCA states that investment platforms are increasingly used by consumers and financial advisers to access retail investment products and to manage investments.  This market has grown over the last 8 years, with Assets Under Administration (AUA) for both adviser and direct platforms increasing from £108 billion in 2008 to £500 billion in 2016. As part of the study, the FCA will explore whether platforms help investors make good investment decisions and whether their investment solutions offer investors value for money.

In principle, platforms allow retail investors to pool their money and achieve better investment returns. The FCA will look at how platforms compete in practice and whether they use their bargaining power to get investors a good deal.  The advent of Fintech plays an important rule, especially with Robo-Advisors and online marketplaces that are increasingly pushing into retail portfolio management services.

To provide investors access to retail investment products and information about these products, platforms interact with other platforms, advisers, asset managers and fund ratings providers. The FCA will assess whether these relationships work in the interests of investors.

The Investment Platforms Market Study follows on from the Asset Management Market final report published in June 2017, which highlighted a number of potential competition issues in the platforms sector.


The FCA is accepting feedback on the topics until 8 September 2017. The FCA aims to publish an interim report by summer 2018 which will set out preliminary conclusions and any potential remedies to address concerns.