Asia Fintech and Payments regulatory update - August 2024

Hong Kong SAR

Virtual Assets

Consultation conclusions on regulatory regime for stablecoin issuers: The Hong Kong Financial Services and the Treasury Bureau and the Hong Kong Monetary Authority (HKMA) jointly issued the consultation conclusions on the proposal to implement a regulatory regime for fiat-referenced stablecoin issuers in Hong Kong. With support from the majority of industry stakeholders, the Government will introduce a bill to implement the proposal into the Legislative Council by the end of 2024. Read more.

Hong Kong launches Asia’s first inverse BTC ETF: Hong Kong’s CSOP Asset Management has launched the CSOP Bitcoin Future Daily (-1x) Inverse Product as Asia’s first Bitcoin future inverse exchange traded fund (ETF) on the Hong Kong Stock Exchange on 23 July 2024, which offers investors a method of profiting from declines in the price of Bitcoin. CSOP Asset Management is one of the largest asset managers in China.

HKMA admits new participants to the stablecoin issuer sandbox: Earlier this year, the HKMA launched a stablecoin issuer sandbox for institutions planning to issue stablecoins in Hong Kong. The sandbox allows firms to conduct testing on their operations and communicate views on the proposed stablecoin regulatory requirements. The HKMA has now admitted the first participants to the sandbox, including JINGDONG Coinlink Technology Hong Kong Limited, RD InnoTech Limited, Standard Chartered Bank (Hong Kong) Limited, Animoca Brands Limited, and Hong Kong Telecommunications (HKT) Limited. 

HKMA will align proposed framework on prudential treatment of cryptoasset exposures with Basel Committee standard: HKMA released a circular to all authorised institutions referencing the publication “Disclosure of cryptoasset exposures” by the Basel Committee on Banking Supervision (BCBS). The BCBS framework requires banks to disclose qualitative information on their cryptoasset-related activities, quantitative information on the capital and liquidity requirements for their cryptoasset exposures, and details of the respective accounting classifications. HKMA will align its proposed regulatory framework on prudential treatment of cryptoasset exposures with the updates from BCBS. 

Data and cyber

Hong Kong's proposed critical infrastructure legal framework: The Security Bureau has submitted a discussion paper to the Legislative Council (LegCo) outlining the proposed Protection of Critical Infrastructure (Computer System) Bill for members’ discussion at the LegCo meeting on 2 July 2024 (meeting minutes can be accessed here). This was previously announced in the Chief Executive's Policy Address in October 2022. The Security Bureau plans to formally introduce the Bill to the LegCo before the end of this year. We expect that this Bill will be effective by end of 2025.

Hong Kong establishes Digital Policy Office: On 25 July 2024, the Government announced the establishment of the Digital Policy Office (DPO). The DPO, led by the Commissioner for Digital Policy, will promote data-driven and people-centric digital policies to enhance government efficiency through a digital government. It has three branches including digital government, data governance and digital infrastructure, which will formulate policies, promote the opening up and sharing of data and advanced IT for public services. The DPO will also strengthen digital infrastructure and deepen cooperation with Mainland China, including facilitating cross-boundary data flows.

Mainland China

Payments

Implementation Rules for Supervision of Non-bank Payment Institutions are finalised and released by PBOC: Following the publication of the draft Implementation Rules on the Supervision of Non-bank Payment Institution (the "Implementation Rules") for public comments in May, the PBOC has officially released the full text of the finalised Implementation Rules which come into effect on 9 July 2024. Compared to the consultation draft, there are no significant changes in the finalised Implementation Rules, and most of the content from the consultation draft has been retained. As we updated in May, after the publication of the consultation draft, the key regulatory changes that the Implementation Rules bring about include a detailed classification of payment services, a tiered structure of minimum capital ratio between the non-bank payment institutions’ net assets and the average daily balance of their reserve funds, and a detailed explanation on calculating the minimum registered capital of a non-bank payment institution. A generous grace period is also provided to the existing non-bank payment institutions for their compliance with the new requirements. 

Digital assets

Beijing IP Court recognises the preliminary evidential value of the Data Intellectual Property Registration Certificate: China has been exploring a data intellectual property regime since 2022. In July 2024, the Beijing IP Court for the first time recognised the Data Intellectual Property Registration Certificate as preliminary evidence of proprietary interests in the relevant dataset. The Court also outlined different ways to request judicial protection for datasets such as copyright, trade secret, or unfair competition law, depending on the public accessibility, originality, and economic value of the datasets.

Artificial Intelligence

China releases 2024 AI Industry National Standard Guidelines: The Ministry of Industry and Information Technology published the Guidelines for Establishing the 2024 National Comprehensive Standard System for the Artificial Intelligence Industry, outlining goals to be achieved by 2026. The Guidelines state that China aims to develop over 50 new national and industrial AI standards, covering fundamental commonalities, support systems, key technologies, smart products and services, new industrialisation, industrial applications, and security/governance.

Singapore

Financial regulation landscape

Revised Guidelines on Risk Management Practices – Internal Controls: On 10 July 2024, the Monetary Authority of Singapore (MAS) updated its Guidelines on Risk Management Practices – Internal Controls (Guidelines), which provide guidance to financial institutions on sound practices for their internal control environment and business process controls. Notably, the revised Guidelines include a new section addressing the systems, policies and procedures financial institutions should have in place to address the risks arising from securitisation.

Updated Guidelines on Licensing for Payment Service Providers: On 26 July 2024, the MAS released the revised Guidelines on Licensing for Payment Service Providers [PS-G01] to include new licence application requirements and guidance relating to the licensing process for payment services providers under the Payment Services Act 2019. These changes, which take effect from 26 August 2024, will impact (i) new applicants for a standard and major payment institution licence (regardless of the activity conducted); and (ii) existing licensees applying to vary their licence to add a digital payment token service. 

Fintech

Update on Project Nexus: The Bank for International Settlements (BIS) and partners have announced the completion of the comprehensive blueprint for phase three of Project Nexus, a BIS Innovation Hub project that seeks to enhance cross-border payments by connecting multiple domestic instant payment systems (IPS) globally. In the next phase, the central banks and IPS operators of India, Malaysia, the Philippines, Singapore and Thailand (with Bank of Indonesia as special observer) will work toward live implementation of the project through the establishment of a new entity (Nexus Scheme Organisation) responsible for managing the Nexus scheme.

MAS to commit additional funds to support quantum and AI capabilities: The MAS has announced that it will commit an additional SGD 100 million under the Financial Sector Technology and Innovation Grant Scheme (FTSI 3.0) to support financial institutions to build capabilities in quantum and artificial intelligence (AI) technologies and enable the advancement of quantum and AI related innovation and adoption in financial services. The MAS had previously committed SGD 150 million to FSTI 3.0, which currently consists of six tracks including AI, regulatory tech and environmental, social and governance fintech. A new quantum track will be established under the scheme in support of quantum capabilities, while the existing AI and data grants will be enhanced.

Data and cyber

PDPC launches Proposed Guide on Synthetic Data Generation: The Personal Data Protection Commission (PDPC) has launched a Proposed Guide on Synthetic Data (SD) generation to help organisations understand SD generation techniques and potential use cases, particularly for AI. The guide will be offered as a resource within the Privacy Enhancing Technology Sandbox, which also includes a checklist of good practices to adopt when generating SD in order to guard against any possible risk of re-identification.

Singapore strengthening AI governance: During Personal Data Protection Week, Singapore's Ministry of Digital Development and Information (MDDI) announced its plans to introduce a set of safety guidelines for generative AI model developers and app deployers. Minister Josephine Teo emphasised the need for robust data risk management to build trust in AI products and services. These guidelines will form part of the AI Verify framework, focusing on transparency and testing standards. In addition, a new ASEAN guide on data anonymization will be issued next year, supporting regional businesses on responsible data use.

Japan

Financial regulation landscape

JFSA publish draft guidelines on cyber security: On 28 June 2024, the Japanese Financial Services Agency (JFSA) published the draft of the new guidelines on cyber security in the financial sector to deal with the recent escalation in cyber risk. These guidelines include details of the cyber security management system and cooperation between the JFSA and the relevant authorities. In addition, JFSA published draft amendments to various existing supervisory guidelines to ensure that banks and other regulated firms comply with the guidelines on cyber security.

JSFA publish drafts regarding the Act for Partial Amendments of the Act on Book-Entry Transfer of Company Bonds, Shares, etc: On 11 July 2024, the JSFA published drafts of the cabinet orders and other regulatory instruments regarding the amendments to the Act on Book-Entry Transfer of Company Bonds, Shares, etc. The drafts designate various technical matters to respond to recent developments in information and communications technology, including certain provisions relating to (i) the digitisation of equity securities issued by certain special entities (such as the Bank of Japan), (ii) notice periods for requesting account information of existing shareholders (and certain others), and (iii) provisions on public inspection via the internet. 

Indonesia

Financial regulation landscape

New Guideline on Fintech Operator Registration: Indonesia’s Financial Services Authority (OJK) recently launched a new circular on the registration of fintech (digital financial innovation) operators, (OJK Circular No. 6/SEOJK.07/2024), which is the implementing regulation for the OJK regulation issued earlier this year on Fintech Operators. This regulation aims to provide further certainty on the legality for fintech operators operating novel businesses, which are not captured under the existing regulatory framework, including further guidance/procedure for the registration of fintech operators (including who is eligible to apply for registration as a fintech operator), as well as the procedure for cancellation of fintech operator registration. Fintech operators who are eligible for registration are those: (i) who have passed the OJK sandbox procedure; (ii) who are recommended by OJK; and (iii) who are operating similar businesses to fintech operators described in (i) and (ii).

Thailand

Digital assets

Consultation on amending the Emergency Decree on Digital Asset Business: From 16 July 2024 to 15 August 2024, the Securities and Exchange Commission of Thailand (“Thai SEC”) will be conducting a public consultation on a draft act to amend the Emergency Decree on Digital Asset Business B.E. 2561 (2018). The proposed amendments aim to redefine "digital asset" to encompass underlying technologies such as cryptography and distributed ledger technology, rather than limiting the definition to cryptocurrencies and digital tokens. Additionally, the amendments seek to revise regulations on the offering of digital assets by allowing filings and draft prospectuses to be submitted to the SEC's centralized system for deemed approval, replacing the current requirement for offerings to be made through an ICO portal and approved by the SEC.

Consultation on amending the requirements for operating exchange platforms for digital asset exchange operators: From 11 July 2024 to 26 July 2024, the Thai SEC held a public consultation on proposed amendments to provide details and clarity on the rules governing the listing and delisting of digital assets, as well as trading, clearing, settlement, and market making (collectively referred to as "Exchange Rules"). Additionally, the Thai SEC proposes that digital asset exchange operators be required to disclose their Exchange Rules on their websites.

Electronic transactions

Consultation on amending the Electronic Transactions Act: From 10 July 2024 to 1 December 2024, the Electronic Transactions Development Agency (“ETDA”) will be conducting a public consultation on the draft Electronic Transactions Act, which is set to replace the current Electronic Transactions Act B.E. 2544 (2001). Given the emergence of new technologies related to electronic transactions, the current law has become inconsistent with present electronic transaction practices. This draft introduces the concept of electronic transferable records and provides updates and clarity on electronic documents, electronic signatures, electronic communications and document automation, retention and use of electronic documents and printouts, public announcement of electronic documents, electronic transaction service providers, reliable methods in electronic transactions, and the operation of digital platform service businesses. The ETDA mainly aims to update Thailand's electronic transaction law to align with various model laws introduced by the United Nations Commission on International Trade Law (UNCITRAL).