Daily Dash: Spanish Banks Come Together For Digital Euro

November 11, 2022
Spain’s largest banks, including BBVA and Santander, have set up a working group to assess the impact of the digital euro, UK banking regulator is looking for help with innovation, and Mastercard has teamed up with J.P. Morgan on an open banking product.

Spanish Banks Pioneer Digital Euro Preparations

Spain’s largest banks have set up a working group to carry out a proof of concept (PoC) aimed at assessing the impact of the digital euro, Iberpay, Spain’s payment system operator announced.

The working group includes big banks such as Caixa, BBVA, Santander as well as neobank N26, P2P payment service Bizum and Iberpay.

Participants will analyse the technical, operational and business implications of the introduction of digital euro and its co-existence with existing digital payment services.

The testing is part of a Spanish private initiative, which is “unique and pioneering in Europe”, according to Iberpay, and it “places Spanish banks at the technological forefront of payment methods”.

The group will carry out the PoC by the end of the year and the results will be published in 2023.

FCA Seeking Advice On Innovation

The Financial Conduct Authority (FCA) is on the lookout for people to fill roles in its Innovation Advisory Group. 

First announced over the summer, it is hoped that the group will enhance the Innovation department’s engagement with the industry and inform the FCA’s forward-looking work programme.

The advisory group will meet for the first time in January, and although the FCA has invited a number of key stakeholders to take part, it is also seeking input from stakeholders who wish to join on a rotating basis for an initial one-year period. 

For rotating membership, the FCA is seeking input from senior leaders from stakeholder groups such as consultancies, legal professionals, accelerators and academia.

The Innovation Advisory Group’s role is to share the fintech and regtech sectors’ views on issues and opportunities for innovation in financial services, as well as suggesting topical matters to be explored through Innovation’s initiatives such as TechSprints.

Jail Time For BNPL Bosses For Dodgy Promotions, Warns FCA

The UK's Financial Conduct Authority (FCA) has warned buy now, pay later (BNPL) bosses that they could face prison sentences if they do not comply with financial promotion rules, according to a letter seen by City AM.

The letter outlined that financial promotions must be “clear, fair and not misleading”, and non-compliance with this could carry a maximum sentence of two years imprisonment, a fine, or both. 

The BNPL sector is becoming increasingly scrutinised by regulators, with work being done to enhance consumer protection rules in countries such as Denmark, Ireland and New Zealand.

The UK has also got BNPL rules making their way onto the statute book, separately to the FCA’s intervention. 

In addition to ensuring advertisements are fair, clear and not misleading, new rules will require lenders to ensure loans are affordable, according to the Treasury.

TCH Publishes White Paper On Stablecoins

The Clearing House (TCH), the US private sector cleaning house, has released a research paper that analyses the legal authority and policy considerations for banks’ engagement in stablecoin-related activities.

The paper concludes that regulatory letters, guidance and legal decisions underline that banks have the authority to issue stablecoins to customers.

"We encourage banking regulators to enable banks to enter into stablecoin issuance,” said Rob Hunter, TCH deputy general counsel.

“Doing so will better protect consumers and the economy, as federal regulated banks are subject to a full range of capital, liquidity, cybersecurity and consumer protection requirements that are missing from the stablecoin market today," he added.

UBS Raided By German Authorities Over AML Issues

Authorities in Germany have searched UBS bank branches in Frankfurt and Munich as part of an investigation into a sanctioned oligarch. 

According to the German publication, Der Spiegel, this is part of an investigation into suspected money-laundering by a Russian oligarch, Alisher Usmanov. 

Significant sanctions against the Uzbek-Russian millionaire were introduced in March this year, following the invasion of Ukraine. 

A spokesperson for the oligarch denied allegations. In a statement issued to the press, the spokesperson said that “the businessman is law abiding and conscientious taxpayer who has paid taxes in Russia.”

Meanwhile, the prosecutors office has told reporters that the investigations are “not aimed at the bank concerned or its employees”.

OBIE Begins Search For New Chair 

Charlotte Crosswell, the current chair of the Open Banking Implementation Entity (OBIE), has announced she is stepping down in January. 

Crosswell wished her successor well in a statement released by the organisation.

“The past few years have been an exceptionally exciting period for Open Banking in the UK,” she said. “I am proud of what the OBIE team, the wider ecosystem, and other stakeholders have achieved, delivering on the promise of Open Banking, and creating a world leading framework and thriving sector for the benefit of our citizens.”

Coinciding with Crosswell’s departure, the OBIE also intends to appoint an additional non-executive director (NED) to the board of Open Banking Limited to provide further assurance to the board as OBIE prepares for transition to a future entity. 

The OBIE intends to launch the recruitment process for the NED shortly.

The OBIE has also announced that it will make a number of changes to its operational management structure, as it moves beyond the implementation phase, to support the organisation through the transition.

Mastercard Teams With J.P. Morgan On ‘Pay-by-Bank’

The financial giants Mastercard and J.P. Morgan have partnered to roll-out Pay-by-Bank, an account-to-account payment that uses open banking. 

The pair are piloting Pay-By-Bank with a small number of U.S.-based billers and merchants this year and expect to expand in 2023. 

This product will enable consumers’ financial data to be shared seamlessly between trusted parties, for example, letting them pay bills directly from their bank account with greater security. 

For billers and merchants, meanwhile, it automates consumer onboarding and reduces the risk and cost of storing bank account information. 

“The technology behind Pay-by-Bank reduces the likelihood of unauthorised transactions and frees our clients from the need to retain — and the responsibility to securely maintain — consumer banking information,” said Max Neukirchen, payments chief at J.P. Morgan. 

Billers whose consumers already pay with ACH can choose to integrate the J.P. Morgan Payments Pay-by-Bank solution on their existing payments page. 

Payments NZ Issues Discussion Paper On Real-Time Payments

Payments NZ, the standard-setting body for New Zealand’s payment system, has released a discussion paper setting out plans for modernising the country’s payment infrastructure.

The discussion paper lays out a modular approach to developing the new system, in which the core capability offers real-time connectivity between participants based on ISO 20022 data-rich messages. 

Around the core system sits the overlay layer, which enables the connection of that core to a range of existing and new services.

The modular approach will also enable the migration of different payment types from legacy systems to real-time infrastructure, according to Payments NZ.

The publication of the document is the first step to engaging with the broader public and is part of a ten-year strategy to modernise New Zealand’s payments system known as Payments Direction, as previously reported by VIXIO.

NZ Government Proposes Updates To AML Regime

The government of New Zealand has introduced changes to its anti-money laundering (AML) regime, following a review of the Anti-Money Laundering and Counter Financing of Terrorism Act.

“The act disrupts serious and organised crime, as well as terrorism, by imposing obligations on businesses that provide specific financial and non-financial services, known as reporting entities,” Justice minister Kiri Allan said.

The proposed changes relax the requirement on businesses to verify the address of most customers, extend the timeframe for businesses to submit prescribed transactions reports and exempt registered charities from AML/CTF obligations when they are providing small loans.

“We’ve listened to businesses and agencies and heard what wasn’t working for them. We’re now taking immediate action to improve the regime’s effectiveness,” Allan pointed out.

US Fed Says Non-Banks Could Be Vulnerability To Financial System, Increases Master Account Transparency

The US Federal Reserve (Fed) has published its Financial Stability Report, a semi-annual report that assesses the resilience of the US financial system and identifies potential vulnerabilities.

The report finds that bank lending to non-bank financial institutions (NBFIs), an indicator of NBFI leverage, “reached new highs”, while it noted that measuring and monitoring leverage is difficult due to the lack of comprehensive and timely data.

“These gaps raise the risk that such firms are using leveraged positions, which could amplify adverse shocks, especially if they are financed with short-term funding,” the Fed says.

The report also discusses the Fed’s ongoing climate scenario analysis, which includes assessing risks both to individual financial institutions and to the broader financial system.

Next year, the Fed will engage with a small set of the largest bank holding companies to conduct a pilot supervisory climate scenario analysis exercise.

Meanwhile, the Fed has released a proposal to publish a periodic list of financial institutions that have access to Federal Reserve accounts, known as master accounts, and payment services.

Senate Banking Committee ranking member Pat Toomey (R-PA) said the proposal is “a step in the right direction”, but noted that the Fed should adopt a public database that includes both firms that were granted the master account and firms that were denied access.

US Seizes $3.36bn In Bitcoin In Connection With Silk Road Dark Web Fraud

The US Attorney’s Office for Southern District of New York has announced that it has seized around 50,000 bitcoin, valued at $3.36 bn.

At the same time, James Zhong pled guilty to committing wire fraud when he stole the digital coins from the Silk Road dark web marketplace in 2012. He could now face a maximum sentence of 20 years in prison.

The bitcoins were seized last November.

“For almost ten years, the whereabouts of this massive chunk of missing Bitcoin had ballooned into an over $3.3 billion mystery. Thanks to state-of-the-art cryptocurrency tracing and good old-fashioned police work, law enforcement located and recovered this impressive cache of crime proceeds,” US attorney Damian Williams said.

This seizure was then the largest cryptocurrency seizure in the history of the US Department of Justice (DOJ), and is still the DOJ’s second largest financial seizure ever.

We Don’t See Crypto As Money, Says Dutch Central Bank

“We do not see cryptos as money. The expectation is raised from the crypto market that it can function as money. But in practice it doesn't. Cryptos do not have the characteristics of money,” a new study from De Nederlandsche Bank (DNB) has concluded

The DNB undertook the study with the aim of deepening its understanding of crypto, as well as revisiting its opportunities and risks, considering 2m Dutch consumers are engaged with crypto.

Everyone wants to make money, but it is very important that the honest story is told, the DNB said. 

The DNB does, however, believe that stablecoins hold the possibility of becoming a means of payment, as long as they are properly regulated. Here, the DNB welcomes the introduction of the EU Markets in Crypto-Assets regulation (MiCA), which it speculates will be in place by 2024.

Apple And PayPal Team Up 

PayPal announced the partnership with Apple that enables the two companies to get access to each other’s payment system in its Q3 earnings release.

As part of the agreement, US customers will be able to add PayPal and Venmo network-branded credit and debit cards to their Apple Wallet starting next year and use them anywhere Apple Pay is accepted.

Leveraging Apple's Tap to Pay on iPhone technology, US merchants will also be able to accept contactless debit or credit cards and mobile wallets, including Apple Pay, using an iPhone and the PayPal or Venmo iOS app.

In addition, PayPal will add Apple Pay as a payment option in PayPal checkout flows on merchant platforms, the company said.

Santander Sets Crypto Payment Limits

The UK arm of Santander has told customers that, as of November 15, they will be restricted to a £1,000 limit per transaction, and a total limit of £3,000 in any rolling 30-day period.

The bank has cited fraud as the reasoning for its new policy. 

“We want to do everything we can to protect our customers and we feel that limiting payments to cryptocurrency exchanges is the best way to make sure your money stays safe,” the bank said in a statement. 

Santander has also said that it will continue to stop payments being sent to Binance. This follows the Financial Conduct Authority's warning to consumers about the crypto exchange and is again aimed at protecting against fraud. 

Customers can still withdraw any money that they have with Binance into their Santander account.

BaFin Tells Deutsche Bank To Get Its Act Together

Deutsche Bank has been told by the German Federal Financial Supervisory Authority (BaFin) that it needs to urgently fix its financial crime controls. 

According to a statement released on Friday (November 4), the financial watchdog said that it has ordered the bank to comply with requirements imposed in September 2018 and February 2019.

"We are fully aligned with the BaFin on the necessary measures and have already completed a large proportion of them,” a spokesperson for Deutsche Bank said in a statement released to the press.

The bank’s issues with financial crime compliance have been well documented. In April, for example, the bank’s Frankfurt headquarters were searched by federal authorities following accusations of money laundering. 

Meanwhile, in 2017, US authorities took action against the bank for its role in a $10bn Russian money laundering scheme that involved its Moscow, New York and London branches.

New York Fed Publishes wCBDC Results

The Federal Reserve Bank of New York has issued a report on Phase I results of Project Cedar, the reserve bank’s research into a technical framework for a potential wholesale central bank digital currency (wCBDC).

The experiment, which lasted 12 weeks, developed a wCBDC prototype and came to the conclusion that blockchain can deliver fast and safe payments in wholesale cross-border transactions.

The New York Fed stressed the research is intended to form part of “a broad and transparent” public dialogue about CBDC from a technical perspective and it does not mean the Fed has made any decisions regarding the issuance of a retail or wholesale CBDC.

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