The Bank for International Settlements (BIS) has released a working paper outlining the results of a survey of 81 central banks regarding their engagement in central bank digital currency (CBDC) work, as well as their motivations and intentions regarding the issuance of CBDC. The survey was conducted in the fall of 2021 and also asked for central banks’ assessment of the use of stablecoins and other cryptocurrencies (or crypto-assets) in their jurisdictions.

The responses show that Covid-19 and the emergence of cryptocurrencies have accelerated work on CBDCs. Moreover, more than two-thirds of central banks consider that they could issue a retail CBDC in the short or medium term. Many are exploring a CBDC ecosystem that involves private sector collaboration and interoperability with existing payment systems. [6 May 2022]

The Bank for International Settlements (BIS) has released a discussion paper on big tech, quick response (QR) code payments and financial inclusion. The document examines whether:

• the use of QR codes in payments allows businesses to access large technology credits;
• access to and use of big tech credit allows businesses to access more traditional bank credit; and

there are real effects resulting from the use of QR codes in the payment and subsequent granting of credit on the volume of business of companies. [4 May 2022]

The FCA has published a speech by Nikhil Rathi, Chief Executive, delivered at the 30th Anniversary Dinner of the Chartered Institute for Securities & Investment. Mr. Rathi pointed out that:

• FCA is more resilient to today’s economic and geopolitical disruptions;
• digital skills will be integrated into all future financial services training as the boundaries between technology and industry blur;
• with other regulators, the FCA is working to maximize the benefits for technology consumers, while mitigating the risks; and
• the FCA has identified the need to strengthen financial education as children begin to participate in crypto-assets. [6 May 2022]

Her Majesty’s Government (HMG) has published a response to the consultation on a new pro-competitive regime for digital markets. The consultation explored views on the proposed design of a new pro-competitive regime for digital markets. The majority of respondents supported the plan proposals. However, it was noted that aspects of the scheme will be new and untested, and respondents suggested that greater clarity might be needed after the scheme is in place – for example through guidance and transparency. HMG will introduce legislation to implement these reforms when parliamentary time permits. [6 May 2022]

The European Insurance and Occupational Pensions Authority (EIOPA) has published feedback on blockchain and smart contracts in insurance. The feedback statement provides a high-level summary of the responses received from stakeholders during a previous public consultation on the subject, as well as EIOPA’s reactions to them. EIOPA notes that insurers see the potential of blockchain and are exploring possible use cases across the insurance value chain to streamline operations and better serve customers. [6 May 2022]

The European Banking Authority (EBA) has published a final report on non-bank lending in response to the European Commission’s (EC) call for advice on digital finance launched in February 2021. The EBA’s proposals address risks arising from the provision of loans by non-banking entities in the areas of supervision, consumer protection, the fight against money laundering and the financing of terrorism (AML/CFT), macro and microprudential risks. [4 May 2022]

The Australian Securities and Investments Commission (ASIC) has announced that, for the first time in Australia, the Federal Court has found that an Australian Financial Services (AFS) licensee breached its license obligations to operate efficiently and equitably by not having adequate cybersecurity risk management systems in place. Several cyber incidents occurred from mid-2014 to mid-2020, resulting in the compromise of customers’ sensitive personal information. The AFS Licensee accepted an agreed statement of facts and admissions, and the Court ordered the AFS Licensee to engage a cybersecurity expert to identify the steps needed to manage its exposure to cybersecurity risks. The judgment highlights the importance of treating cybersecurity risk as a material risk in the provision of financial services and demonstrates the Court’s disapproval of inadequate cybersecurity risk management systems. [5 May 2022]

The Bangko Sentral ng Pilipinas (BSP) has announced that it is considering how to apply machine learning techniques to improve its central banking functions, including its role in banking supervision. The BSP uses natural language processing to convert text into data to produce a quantitative summary, such as the News Sentiment Index and Economic Policy Uncertainty Index which are currently under development. The central bank also uses machine learning approaches to generate nowcasts of regional inflation and domestic liquidity. These models complement BSP’s existing suite of models for macroeconomic forecasts.

Regarding banking supervision, the BSP aims to use machine learning techniques to improve its data validation processes and better identify outliers. While exploring the various opportunities that machine learning presents, BSP also notes that there are challenges associated with the technology, from difficulties in interpreting causal relationships in machine learning models to necessary investments in IT infrastructure. and capacity building. [4 May 2022]