Global Payments Newsletter, February/March 2023

STOP PRESS: The closure of Silicon Valley Bank (SVB) is raising many questions in and around the financial institutions sector. As the situation evolves, our team is here to address the legal implications. We have created a multi-practice SVB Task Force to offer guidance to those affected by this incident and other issues that will arise in connection. This U.S./UK multi-practice team is aggregating news, external resources, legal FAQs, and more to help you stay informed and prepared. Click here for all of this and more. These materials will be regularly updated as new information comes in.

In this Newsletter:

• Regulatory Developments: Payments
• Regulatory Developments: Digital Assets
• Market Developments
• Surveys and Reports

For previous editions of the Global Payments Newsletter, please visit our Financial Services practice page.
 

Regulatory Developments: Payments

United Kingdom: UK Financial Services Regulatory Initiatives Forum publishes sixth edition of Grid

On 28 February 2023, the Financial Services Regulatory Initiatives Forum published the sixth edition of the Financial Services Regulatory Initiatives Grid. Some of the key expected developments with regards to payments and digital assets are:

• An FCA consultation on strengthening requirements for the safeguarding of funds for payment institutions and electronic money institutions, using enhanced rule-making powers to be conferred on the FCA as part of the Future Regulatory Framework Review, due in H1 2023. Final rules and a feedback statement are due to be published around the end of 2023 or early 2024.​

• Bank of England/FCA consultations on rules for a stablecoin regime relating to the stablecoin provisions in the Financial Services and Markets (FSM) Bill, expected in Q1/Q2 2023.​
• An HM Treasury response to its consultation on managing the failure of systemic digital settlement asset firms, due in H1 2023.​
• An FCA consultation on access to cash rules, due in Summer 2023 once the FSM Bill has received Royal Assent.​

For further information please see our Engage article.

United Kingdom: FCA publishes Consumer Duty implementation portfolio letter to payment services and e-money firms

On 21 February 2023, the FCA published a second batch of portfolio letters on implementing the Consumer Duty. These were addressed to CEOs or directors of firms in several sectors including payments and e-money. Each letter reminds firms of the implementation timeline, the key elements of the Consumer Duty, and how it applies to their respective portfolios. The letters also provide guidance on the FCA's expectations for embedding the Consumer Duty and highlight feedback from recent reviews. Additionally, the letters emphasise that the CEO or directors should make implementing the Consumer Duty a priority and ensure that good outcomes for customers are central to the firm's strategy and business objectives.

The list of focus areas for payments firms to consider in order to deliver consistently good consumer outcomes under the Duty include topics such as:

• Distribution chains;
• Strong customer authentication;
• Proportionate fees and charges;
• Customer protections and use of third parties in chains; and
• Channels and account freezing practices.

This Engage article sets out more detail on these key areas of focus for payments firms.

Global: FSB sets out priority actions for improving cross-border payments 

On 22 February 2023, the Financial Stability Board (FSB) published a paper outlining the actions it intends to take to meet the targets in the G20 roadmap for enhancing cross-border payments. The FSB is looking to progress the three priority themes of:

• payment system interoperability and extension;
• legal, regulatory and supervisory frameworks; and
• cross-border data exchange and message standards.

The purpose of the roadmap is to make cross-border payments cheaper, faster, more transparent and more accessible, whilst promoting accountability of users in the system. The FSB has stated an intention to publish annual updates with key performance indicators against the quantitative targets it set in its October 2021 final report.

United Kingdom: PSR requests views on papers for card scheme and processing fees market review

On 23 February 2023, the Payment Systems Regulator (PSR) published two papers as part of its card scheme and processing fees market review.

The first is the approach to profitability analysis working paper (MR22/1.5) setting out the PSR’s proposed approach to assessing whether the profitability of Mastercard and Visa in the UK indicates a competitive market. Following analysis from the card schemes’ EU businesses, the PSR has requested further information.

The second is the competitive constraints in card payment systems call for evidence (MR22/1.4).  In this, the PSR is requesting insights on how competition in the market is impacting on the fees set by Visa and Mastercard, with questions on the topics of:

1. the intensity of competition and innovation in the payments ecosystem;
2. differences in the competitive dynamics on the issuing and acquiring sides of the market;
3. the impact of transparency on competitive pressure at all levels of the value chain; and
4. the must-take status of Mastercard- and Visa-branded cards.

The deadline for responses is 11 April 2023, with the PSR intending to publish an interim report in Q4 2023.

United Kingdom: Bank of England responds to feedback on RTGS and CHAPS tariff framework consultation, and RTGS service roadmap

On 13 February 2023, the Bank of England (BoE) published its responses to feedback received on (i) its consultation on proposals for a new framework for the Real-Time Gross Settlement (RTGS) and CHAPS tariffs and (ii) its consultation on the next stage of the roadmap for the RTGS service beyond 2024.

The response to the RTGS and CHAPS tariff consultation summarises the BoE’s decisions concerning how it will recover the cost of reviewing and running the RTGS and CHAPS services. It intends to implement the new tariff framework on the launch of the new core settlement engine in summer 2024.

The response to the roadmap for the RTGS service beyond 2024 summarises the BoE’s proposals for the features for the next stage of the RTGS roadmap. The first priority under the roadmap is developing the centralised RTGS identity service.

Global: CPMI consultation on proposed ISO 20022 harmonisation requirements

On 1 March 2023, the Committee on Payments and Market Infrastructures (CPMI) published a consultative report on the harmonisation of ISO 20022 requirements for cross-border payments. The aim of the 15 proposed harmonisation requirements is to provide overarching guidance for global and domestic market practices guidelines to ensure that the ISO 20022 messaging standard is consistently used to facilitate faster, cheaper, more accessible and more transparent cross-border payments.

The proposed requirements were developed by a joint task force established by the CPMI and the SWIFT Payments Market Practice Group (PMPG) and have been divided into three sections:

• Block A – fundamentals;
• Block B – transparency; and
• Block C – structured and coded data.

The deadline for comments is 10 May 2023. Following consultation feedback, the CPMI will revise its report and deliver the final report to the Indian G20 Presidency by the end of 2023. The intention is that the requirements should take effect in November 2025, which would align with SWIFT's scheduled date for removing the ability to send cross-border MT payment messages over its network.

European Union: EBA clarifies SCA requirements for digital wallets

On 31 January 2023, the EBA published a press release summarising three new Q&As that it has published to clarify the application of strong customer authentication (SCA) under PSD2 to digital wallets.

The press release also refers to three previously published Q&As on the same topic.

The EBA explains that the six Q&As together clarify the application of SCA to the enrolment of a payment card to a digital wallet and to the initiation of payment transactions with digitised versions of a payment card. They also clarify the requirements that apply to the outsourcing of the application of SCA to digital wallet providers.

United Kingdom: Treasury Committee publishes regulators' responses to its questions about proposed approach to introducing mandatory reimbursement for APP fraud

On 4 March 2023, the House of Commons Treasury Committee published the Payment Systems Regulator's (PSR) response to its earlier letter regarding the PSR's proposals to introduce mandatory reimbursement for authorised push payment (APP) scams (in CP22/4).

The PSR states that its proposals are subject to change and it plans to publish its final policy statement in May 2023. Among other things, it sets out the factors it considered ahead of consulting on the £100 minimum threshold for reimbursement and notes that its proposals gave firms the ability not to impose the threshold. In addition, it explains that it proposed the £35 excess to mitigate against potential increased moral hazard, reduce administrative costs for firms and reduce the likelihood that payment services providers (PSPs) were reimbursing civil disputes.

This follows the publication by the House of Commons Treasury Committee of a report on the PSR’s mandatory reimbursement proposals on 6 February 2023. The report set out some concerns relating to the proposals. The PSR published its response to the Committee's report, noting that the report included a misinterpretation of its proposal on use of its powers and that it had clarified this to the Committee.

Alongside its report, the Committee also published:

• A letter it sent to the Bank of England, asking whether the Bank is taking similar measures to reduce APP fraud using CHAPS, to which the Bank has now responded;
• A letter it sent to the FCA enquiring whether the FCA intends to implement similar measures for "on-us" fraud where the victim and fraudster hold accounts with the same PSP, to which the FCA has now responded;
• A letter it sent to the FOS discussing how slow resolution of reimbursement disputes by the FOS could undermine the mandatory reimbursement proposal, to which the FOS has now responded.

United Kingdom: PSR consults on APP scam reporting guidance

On 9 February 2023, the Payment Systems Regulation (PSR) published Consultation Paper CP23/1, which contains draft guidance for reporting authorised push payment (APP) scam payments. It has also published a draft reporting template. 

CP23/1 builds on “Measures 1: data collection and publication” as set out in Consultation Paper CP21/10, published in November 2021, which proposed requiring the 14 largest payment service provider groups to provide six-monthly data on APP scam performance. The first submission is due in May 2023 and the PSR will publish its first report in October 2023.

The PSR will review, and where necessary update, the guidance every six months.

The deadline for feedback on the draft guidance and draft reporting template is 23 February 2023.

Ireland: Central Bank of Ireland publishes Dear CEO letter to payments industry

On 20 January 2023, the Central Bank of Ireland (CBI) published a Dear CEO letter to the payments industry (Letter) detailing its findings from recent industry engagement. The Letter sets out certain required actions for payment institutions (PIs) and electronic money institutions (EMIs), including that all firms obtain an external audit of their safeguarding framework and submit this to the CBI by 31 July 2023.

The Letter also details the CBI’s expectations for aspects of firms’ operations. The areas covered are:

• Safeguarding;
• Governance, risk management, conduct and culture;
• Business model, strategy and financial resilience;
• Operational resilience and outsourcing; and
• Anti-money laundering and countering the financing of terrorism.

This Engage article by members of the Hogan Lovells Dublin office sets out more detail on the required actions and CBI expectations in the Letter.

European Union: EBA response to Q&A regarding ‘Triangular Passporting’

On 6 January 2023, the EBA Q&As were updated to include a response to a query relating to so-called ‘triangular passporting’ under PSD2. The question was submitted by the French ACPR on 8 February 2022, and the response was prepared by the European Commission as it involves a matter of interpretation of EU law.

‘Triangular passporting’ arises in scenarios where a payment services provider licensed in one country (A) uses an intermediary (e.g. a branch or an agent) located in country B in order to provide payment services in country C. The question from the ACPR noted that PSD2 is silent on the status of such arrangements, which has led to inconsistent approaches being taken across Member States, and flags the uncertainty on points such as which Member State’s anti-money laundering and consumer protection regimes should apply to such arrangements.

The response to the question clarifies that payment or electronic money services, where performed on a cross-border basis into country C, are always provided on the basis of the firm’s authorisation in country A, irrespective of the involvement of any branch or agent in country B.

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Regulatory Developments: Digital Assets

United States: Crypto liquidity guidance released by U.S. federal banking regulators

On 23 February 2023, the Federal bank regulatory agencies – that is, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency - issued a joint statement in response to the recent developments in the cryptocurrency sector. The statement highlights key liquidity risks associated with certain sources of funding from cryptoasset-related entities that banking organisations should be aware of, including unpredictable deposit inflows and outflows.

The agencies emphasise the importance of active monitoring and effective risk management practices to manage such risks, including understanding the drivers of deposit behaviour, assessing potential concentration and interconnectedness, and incorporating liquidity risks into contingency planning. The statement does not create new risk management principles and banking organisations are neither prohibited nor discouraged from providing banking services to customers of any specific class or type, as permitted by law or regulation.

Hong Kong: Securities and Futures Commission consults on licensing requirements for virtual asset trading platform operators

On 20 February 2023, the Hong Kong Securities and Futures Commission (SFC) published a consultation paper on the proposed regulatory requirements for virtual asset (VA) trading platform operators under the new SFC licensing regime.

In December 2022, the Hong Kong Government passed the Anti-Money Laundering and Counter-Terrorist Financing (Amendment) Bill 2022, which introduced a licensing regime (VASP regime) for VA trading platforms. Under the VASP regime, VA trading platforms which carry on business in Hong Kong or actively market to Hong Kong investors will be required to be licensed with the SFC. The VASP regime was scheduled to take effect in March 2023, but this has now been delayed to 1 June 2023, subject to a transitional arrangement.

In order to finalise the licensing requirements under the VASP regime, the SFC has launched the current consultation to seek views on regulatory requirements under a new Guideline for Virtual Asset Trading Platform Operators (VATP Guidelines), which are proposed additions or variations to the current requirements which apply to platform operators licensed under the Securities and Futures Ordinance (SFO).

On commencement of the VASP regime, the SFC will regulate the trading of security tokens by VA trading platforms under the existing SFO requirements, and the trading of non-security tokens by VA trading platforms under the VASP regime. 

The consultation closes on 31 March 2023.

Please refer to this Engage article by members of our Hong Kong office if you would like to know more about the proposals covered in the consultation.

Australia: Token mapping consultation ends

On 3 March 2023, the Australian Treasury’s February 2023 token mapping consultation closed. ‘Token mapping’ is the process by which Australian lawmakers classify different crypto tokens by their characteristics to develop an appropriate/tailored regulatory regime. The consultation aimed to obtain input from stakeholders on the current regulatory regime.

The government also plans to release a separate consultation paper on the licensing and custody framework for cryptoasset service providers in mid-2023.  According to a press release  by the Australian Treasury, the overarching aim is to:

• strengthen enforcement action;
• increase consumer protection; and
• establish a framework for regulatory reform.

Cryptoassets are currently largely unregulated in Australia.

Hong Kong: HKMA issues proposals for a new licensing regime for stablecoins

On 31 January 2023, the Hong Kong Monetary Authority (HKMA) published conclusions to its January 2022 discussion paper on cryptoassets and stablecoins. The majority of respondents agreed with taking a risk-based approach to the regulation of stablecoins, and aligning with global regulatory practices.

The HKMA is proposing to regulate stablecoins that reference fiat currencies. It will not (at this time) regulate algorithmic stablecoins. The scope of the licensing regime will cover key activities in connection with stablecoins, including the establishment and maintenance of rules governing stablecoin issuance, creation and destroying of in-scope stablecoins, stabilisation and reserve management as well as wallet services (Regulated Activities).

The licensing regime will be triggered when a person:

• conducts a Regulated Activity in Hong Kong;
• actively markets a regulated activity to the public of Hong Kong; or
• conducts a Regulated Activity which concerns a stablecoin that purports to reference to the value of the Hong Kong dollar.

The regime will also apply where, in the opinion of the HKMA, the conduct or activity in question should be regulated as a matter of significant public interest.

The HKMA plans to implement a regulatory regime in 2023/24, and will continue to consult the industry and monitor domestic and global markets as it further develops its final regulations.

This Engage article by members of our Hong Kong office provides more information on this development.

Global: Universal Digital Payments Network launched

On 19 January 2023, the launch of the Universal Digital Payments Network (UDPN) was announced at Davos, during the World Economic Forum week. UDPN is a messaging service designed with the purpose of providing interoperability between stablecoins and central bank digital currencies through the use of distributed ledger technology. UDPN aims to be the SWIFT equivalent for stablecoins and CBDCs. It will be accessible to all business IT systems and regulated digital currencies, promoting financial inclusion. However, unregulated public-chain currencies (e.g. Bitcoin) will not be accepted onto the platform.

United Kingdom: HM Treasury consultation and call for evidence on a future cryptoassets regulatory regime and consultation on bespoke temporary exemption for financial promotions relating to qualifying cryptoassets

On 1 February 2023, HM Treasury (HMT) published a consultation and call for evidence setting out proposals for a future regulatory regime for cryptoassets and marks the next phase of the government's approach to regulating cryptoassets. The initial approach taken towards regulation of stablecoins when used as a form of payment and the financial promotion of cryptoassets are set out in legislative proposals in the Financial Services and Markets Bill 2022-23 (FSM Bill) that is currently before Parliament. 

The consultation focuses specifically on the future UK regulatory framework for cryptoassets used within financial services, rather than the wider application of distributed ledger technology (DLT) in financial services or the use of cryptoassets outside financial services.

In outline, HMT intends to create a number of new regulated or designated activities tailored to the cryptoasset market where these activities seek to mirror, or closely resemble, regulated activities performed in traditional financial services under the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (SI 2001/544) (RAO). These include payment activities, for example the execution of payment transactions or remittances involving fiat-backed stablecoins. As mentioned above, these also form part of phase 1 of HMT’s work on cryptoasset regulation.

HMT is also proposing a cryptoassets market abuse regime based on elements of the UK Market Abuse Regulation (596/2014) (UK MAR) for financial instruments.

HMT intends to continue to pursue a phased approach to regulating cryptoassets, which is prioritised according to the areas of greatest risk and opportunity.

The call for evidence relates to decentralised finance (DeFi), certain other cryptoasset activities and sustainability in the context of regulating cryptoassets.

The consultation and call for evidence closes 30 April 2023. For more on this development, take a look at this Engage article.

Also on 1 February 2023, HMT published a policy statement setting out a bespoke temporary exemption for financial promotions relating to qualifying cryptoassets. The temporary exemption will enable cryptoasset businesses currently registered with the FCA under the AML/CTF regulations (who are not otherwise authorised persons) to communicate their own financial promotions in relation to qualifying crypotassets. See this Engage article for more information. In addition, on 6 February 2023 the FCA published a statement on the new UK financial promotions regime it plans to introduce for firms that market cryptoassets to UK consumers.

United Kingdom: HM Treasury and Bank of England consult on model for a digital pound

On 7 February 2023, the Bank of England (Bank) and HM Treasury (HMT) published a joint consultation paper on the model for a UK retail central bank digital currency (CBDC) or ‘digital pound’ that would sit alongside, not replace, cash.

On the basis of their work to date, both the Bank and HMT consider it likely that a digital pound will be needed in the future, justifying further preparatory work now.​ Some key points from the consultation are as follows:

• The proposed model for the digital pound is organised around three themes: a platform model, considerations around data protection and privacy, and the user experience.​
• Delivery of the digital pound would be a public-private partnership reflecting the comparative advantages of each sector.​
• The Bank would issue the digital pounds which would be recorded in a ‘core ledger’ which it would build and operate.​
• Regulated private firms – Payment Interface Providers (PIPs) and External Service Interface Providers (ESIPs) – could then access the core infrastructure via an API. They would provide digital pass-through wallets to pass instructions from the customer to the core ledger, meaning that they would never be in possession of customers’ digital pound funds.​
• The digital pound would have at least the same level of privacy as a bank account and would also allow users to make choices about the way their data is used. ​
• As the entity holding the direct commercial relationship with users, PIPs would gather and have access to personal data in order to prevent financial crime through compliance with KYC and AML requirements. PIPs would anonymise personal data before any sharing with the Bank.​
• At least during its introductory period (possibly lasting several years), there would be some limits on holdings of digital pounds.​

More detailed information about design, including options for enabling interoperability between the digital pound and cash, and the digital pound and bank deposits respectively, can be found in the accompanying Technology Working Paper.​

The deadline for responses on both papers is 7 June 2023. A decision on whether or not to proceed to a build phase would be made at the end of the design phase, around 2025/2026. This work will shorten the lead time for the introduction of a digital pound, which would be in the second half of the decade.​

For more on this development, take a look at our Engage article.

United Kingdom: New UK Forum for Digital Currencies formed

On 11 January 2023, UK Finance published a joint statement announcing the formation of a new UK Forum for Digital Currencies (UK FDC). This forum is made up of Innovate Finance, the City of London Corporation, the Digital Pound Foundation, the Payments Association and TheCityUK.

The UK FDC seeks to develop better policies and regulations for digital currencies and cryptocurrencies. The aim is to create a safe and secure environment for innovators to grow and attract international investment by, among other things, advocating for the development of a legal and regulatory framework that promotes innovation whilst also promoting sufficient levels of financial stability, consumer protection and market integrity.

Thailand: SEC introduces stronger regulation of crypto custody providers

On 17 January 2023, Thailand's Securities and Exchange Commission (SEC) released a statement about new regulations it has introduced for crypto custody providers in the interests of protecting customer assets.  The regulations came into effect on 16 January 2023 and require crypto custody providers to:

• establish a digital wallet system;
• establish policies and procedures for safely and securely developing and accessing keys and other information; and
• create and test a contingency plan in case of any problems with the wallets and/or keys.

UAE: Dubai introduces virtual asset regulations

On 7 February 2023, Dubai’s Virtual Assets Regulatory Authority (VARA) published the Virtual Assets and Related Activities Regulations 2023 (the VARAR). The VARA is an independent regulator for virtual assets which seeks to position Dubai as an international hub for virtual assets, whilst improving investor understanding and innovation in the industry.

The VARAR set out a framework designed to promote economic sustainability whilst addressing money laundering and terrorist financing risks. The regulations cover issuance services, advisory services, broker-dealer services, custodial services, exchange services, lending-borrowing services, payments and remittances services, and virtual asset management services.

El Salvador: Congress approves law enabling cryptocurrency-backed bonds

On 12 January 2023, it was reported that the Congress of El Salvador had passed its "Digital Asset Issuance" legislation on 11 January by 62 votes to 16. This legislation will allow El Salvador to issue sovereign bonds backed by Bitcoin, through which the government is aiming to raise $1 billion. The proposed bonds will have a ten-year maturity rate and an annual interest rate of 6.5%.

The current plan is to use the money raised to pay off some of the country's national debt; to build "Bitcoin City", a crypto-mining hub and special economic zone powered by hydrothermal energy from a nearby volcano; and to create Bitcoin mining infrastructure.

The bill will become law once it is ratified by the President of El Salvador.

Global: Central banks look into offline central bank digital currency (CBDC) payments 

On 11 January 2023, Chinese state media outlet Yicai Global reported that the People’s Bank of China has added an offline payment function to its digital yuan payment app for Android. This enables users to make payments using the digital currency even if they have no internet connection or their phone has run out of battery. The "Tap to Pay" function gives users the ability to select how many payments can be made offline and how much these payments can be for. To make payments exceeding either of these requires entering a verification code on the device.

In February 2023, the Bank of Canada published a staff analytical note that examines the use of CBDCs for offline payments in various scenarios, such as internet outages resulting from a natural disaster.

Separately, in an interview on 3 March 2023 Ajay Kumar Choudhary, Executive Director at the Reserve Bank of India, stated that they are examining offline CBDC use.

Global: FSB publishes report on financial stability risks of DeFi and future work

On 16 February 2023, the Financial Stability Board (FSB) published a report on its assessment of the financial stability risks of decentralised finance (DeFi).

According to the FSB’s findings, while the purportedly decentralised processes to provide financial services are in many cases novel, DeFi does not differ substantially from the traditional financial system in the functions it performs. In addition, the degree of decentralisation varies broadly. However, attempts by DeFi organisational structures to replicate some functions of the traditional financial system means that DeFi inherits and often amplifies the vulnerabilities of that system.

The FSB plans to carry out additional work to:

• Analyse the growth and implications of the tokenisation of assets.
• Explore approaches to fill data gaps to measure and monitor interconnectedness of DeFi, collaborating with standard-setting bodies (SSBs) and regulatory authorities.
• Examine the extent to which the FSB's proposed policy recommendations for the international regulation of cryptoasset activities may need to be enhanced to acknowledge DeFi-specific risks and facilitate the application and enforcement of rules.

Consider, with the SSBs, the regulatory perimeter across jurisdictions to determine which DeFi activities and entities fall or should fall within that perimeter.

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Market Developments

India: Digital rupee being piloted for in-store contactless payments

On 6 February 2023, it was reported that Indian banks ICICI, IDFC First, and Kotak Mahindra have started enabling selected merchants to accept payments made through contactless methods in-store using the prototype digital rupee. Reliance Retail is the first merchant to confirm that it will participate in this trial.

South Africa: FlySafair rolls out WhatsApp payment service

On 2 February 2023, mobile messaging payment service Clickatell announced that it has partnered with South African airline FlySafair to launch Chat 2 Pay, enabling FlySafair customers to pay via the airline’s WhatsApp channel. The service requires customers to send FlySafair’s account a “Hi” message, after which they can access a secure payment link and follow the prompts to make a purchase.

Global: Mastercard partners with Google to launch Google Pay in Kuwait

On 2 February 2023, Mastercard announced its partnership with Google to launch Google Pay in Kuwait, enhancing digital payment capabilities in the country. The service enables users to make contactless payments in stores, online, and through apps using their Android phones or Wear OS devices. Several Kuwaiti banks have been granted licences to activate Google Wallet in the country.

APAC and UK: Wireapp launches crypto-enabled debit and prepaid cards 

On 13 February 2023, Wirex announced that it had entered into a long-term strategic partnership with Visa. As a result of this, Wirex will become a member of Visa in APAC and the UK, meaning it can issue crypto-enabled debit and prepaid cards in more than 40 countries. Additionally, this partnership will allow Wirex to introduce more crypto-related payment products in APAC, the UK, the US and Europe.

UK: Payoneer receives EMI licence from FCA

On 20 February 2023, it was reported that Payoneer, a US-based financial technology company, has received an electronic money licence from the UK's Financial Conduct Authority (FCA), allowing the company to expand in the UK and offer multiple financial products to its customers, such as different payment services and transaction methods.

Singapore: Singapore links digital payments with India

On 21 February 2023, Singapore and India launched a digital payments connection that links Singapore's PayNow digital payments infrastructure with India's Unified Payments Interface. This allows for real-time virtual transfers of money across borders in seconds and aims to reduce the cost and inefficiencies of remittances between both countries. The initiative is backed by the Monetary Authority of Singapore and the Reserve Bank of India and is the world's first real-time payments system that offers scalable digital services based on cloud technology.

Philippines: Armenotech partners with Tempo France and Cebuana to enable Stellar blockchain remittances

On 23 February 2023, Tempo, a French remittance company, announced that it has partnered with Philippine financial service provider Cebuana Lhuillier and tech firm Armenotech to enable money transfers from Europe to the Philippines through the Stellar blockchain platform. The partnership will allow users to send money and pick up Philippine pesos at more than 10,000 Cebuana locations across the Philippines.

European Union: Fingerprints and Flywallet are developing biometric wearable payment products

On 24 February 2023, biometrics company Fingerprints Cards announced that it will collaborate with the biometric wearables technology start-up Flywallet to develop and launch biometric wearable products for the European market. This collaboration will enable Flywallet’s wearable tools to incorporate Fingerprints’ biometric sensors, algorithms, and software.

India: CRED adds buy-now pay-later and tap to pay offerings

On 27 February 2023, it was reported that the Indian fintech platform CRED is launching a buy-now pay-later service, allowing users to make seamless payments on the app and partner merchants, and clear bills at no charge in 30 days. The service is initially rolling out to select customers.

Middle East: UAE emirate Ras Al Khaimah set to launch a free trade zone for digital and virtual asset companies

On 28 February 2023, it was reported that Ras Al Khaimah is launching a new free-trade zone for digital and virtual asset companies called RAK DAO. The free-trade zone will be purpose-built for non-regulated activities in the virtual assets sector and will focus on emerging technologies such as blockchain, metaverse, NFTs, and DApps.

Brazil: Meta receives authorisation to include payments feature in WhatsApp

On 2 March 2023, it was announced that Brazil's central bank has approved Meta Platforms' launch of payments for small and medium-sized businesses in Brazil via its messaging app WhatsApp, building on the existing local peer-to-peer payment system. This approval comes as Meta aims to use the Brazilian market as a key test space for business messaging, as their core advertising business has stalled. While WhatsApp users in Brazil have been able to make payments between users through the app since 2021, this new development clears the way for merchants to receive payments.

Japan: Three banks are developing a payment system for issuing stablecoins

On 3 March 2023, it was reported that Three Japanese banks, Tokyo Kiraboshi Financial Group, The Shikoku Bank, and Minna no Bank, are collaborating to develop a payment system that uses their stablecoins on a public blockchain. This will comply with Japan's new fund settlement laws and aims to popularise stablecoins for general consumer use and business-to-business remittances.

APAC: AsiaPay launches Visa Instalments

On 6 March 2023, AsiaPay, a digital payment solutions provider in the Asia Pacific, announced that it has launched Visa Instalments in Hong Kong and plans to expand to Southeast Asia. AsiaPay's PayDollar platform now supports Visa Instalments in Hong Kong and will soon support it in Singapore and Malaysia.

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Surveys and Reports

Global: Report on opportunities of crypto-enabled payments

On 2 March 2023, Ripple, a blockchain-based payment solution provider, and the U.S. Faster Payments Council published a report on the transformative opportunities of crypto-enabled payments and what leading providers expect next. The report looks at the findings from a survey of 950 Faster Payments Council subscribers, including analysts and CEOs across 45 countries.

Key findings in the report include:

• 97% of respondents believe that cryptocurrency and blockchain technology will have a significant role in enabling faster payments in the next 3 years.
• 52% of respondents consider crypto use for payments, but only 17% supported crypto-enabled payments at the time of the survey. The main cause seems to be the lack of regulatory clarity with 89% of respondents citing the lack of regulatory clarity as the main deterrent.
• Respondents valued sustainability, with 21.2% of the respondents stating that they would only buy sustainable cryptocurrencies and 30.3% of the respondents strongly preferring sustainable cryptocurrencies.

Global: London tops list of crypto hub cities

On 26 January 2023, crypto tax and portfolio management firm Recap published research into cities leading the way in cryptocurrency adoption. Considering factors such as people employed in crypto-related work, R&D spend, concentration of crypto ATMs, capital gains tax rate, quality of life, and proportion of the population who won crypto, the top 20 cities were determined.

This ranking placed London first, followed by Dubai and then New York. Singapore and Hong Kong were fourth and seventh, respectively. The highest placed cities in mainland Europe were Zug in sixth, followed by Paris in eighth and Berlin in eleventh. Lagos and Sydney were the only African and Australasian cities to make the top 20.

The U.S. had the most cities on the list, with three – New York, Los Angeles (5^th) and Chicago (11^th). Japan was the only other country to have more than one city in the top 20 – Sapporo (13^th) and Osaka (19^th).

Global: Payment methods and fraud prevention are key concerns for banks

On 13 January 2023, Bottomline released its report "The Future of Competitive Advantage in Banking & Payments", which reviewed survey results from 311 actors in the financial institutions space in 34 countries. Notable insights in the report are:

• The most common key priorities for banks are adopting new payments rails (55%), mitigating payment fraud risk (53%), and replacing legacy infrastructure (45%). The most reported key priority for banks during 2022 was creating new revenue streams using digital overlays.
• Three topics were a significant focus for more than half of banks – real-time payments (63%), payment fraud detection and prevention (54%), and cross-border payments (52%).
• Legacy systems were the most common key issue for banks' current payment infrastructure, with 27% reporting this. Second was interoperability between internal systems, which was the key issue for 23% of respondents.

74% of respondents stated that they believe RegTech will become more important in 2023.

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Authored by Virginia Montgomery and Grace Wyatt

Hogan Lovells (Luxembourg) LLP is registered with the Luxembourg bar.