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Global regulators have fintech in their sights

Having been slow to the digital party, financial services are now seeing their own digital revolution. Last month, KPMG and CB Insights announced that 2015 saw fintech startups attract $13.8 billion of funding – this is over double that raised in 2014. Fintech’s rapid expansion has caught the attention of regulators.   

Regulators take note

With fintech companies reportedly taking trillions away from traditional banking services, regulators around the world are sitting up and taking notice. The G20 Financial Stability Board – a body consisting of senior policy makers, central bankers and regulators from G20 and other financially key countries – recently announced that it’s going to evaluate the risks fintech could pose to international financial stability. Additionally, the UK’s Financial Conduct Authority (the FCA) recommended that fintech companies should observe “greater compliance” and a US federal regulator has proposed the creation of a comprehensive regulatory policy for fintech.

Fintech: the pros and cons

Fintech has made international money transfer easier, safer and more efficient over the past few years. For example, alternative payments methods like Apple Pay and the Curve card are making buying goods and services – both at home and abroad – cheap and convenient.

However, similar technology has been connected with illicit dealings, including terrorism and money-laundering. In January, the founder of Liberty Reserve – the digital currency transfer service – pleaded guilty to laundering hundreds of millions of dollars through the site. One of the San Bernardino terrorists reportedly used peer-to-peer lender Prosper to access funds to buy weapons. In China, authorities have made 21 arrests in connection with Ezubao, an online financing platform – reportedly, up to $7.6 billion has been scammed from 900,000 investors.

Putting policy into practice

Given the rise of fintech and the opportunities and problems which it brings, it’s no surprise that regulators are now focusing on the sector. For example, in its latest business plan, the FCA emphasised that it wants to support innovation that benefits consumers while ensuring their protection.

The FCA has started to put this policy into action. It granted an e-money licence to US firm Circle, a social payments app which employs blockchain technology to enable transactions in both bitcoin and dollars. This licence – the first of its kind for a digital currency company – will allow Circle users to make transfers between pounds and euros as well.  

The FCA has also teamed up with the Australian regulator, ASIC, signing the world’s first cross-border agreement designed to support fintech organisations. The aim is to encourage the spread of exciting and effective services by helping firms understand the countries’ respective regulations.

Regulatory burden also provides confidence

For fintech firms, the future may mean more scrutiny from law-enforcers; the hope is that regulators will be supportive and enabling.

Regulation should provide confidence to people using fintech to send money abroad or make purchases overseas – after all, it aims to increase their money’s safety and prevent criminal activity.

The Money Cloud has all the latest on fintech developments, so keep up-to-date by regularly checking our blog. If you’re looking to transfer money online using our services, there's no need to worry about your transaction’s safety. All of our brokers are authorised and regulated by the FCA. Contact us for more information about how we could help you. 

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