Navigating the regulatory landscape is a key challenge for the FinTech industry. The innovative nature of FinTech makes it difficult for businesses to determine what kind of license or approval is needed from the appropriate authorities and whether the new product/service falls within the existing regulatory regimes. This challenge is further exacerbated by FinTech companies looking to scale internationally, as it is difficult to navigate new jurisdictions and comply with new regulations. The regulatory uncertainty and high compliance costs associated with this can be discouraging, resulting in some FinTech companies exiting the market.
The UK government has come up with the FinTech Sector Strategy that aims to alleviate this problem and expand the FinTech sector in the UK and internationally. As part of the Strategy, initiatives such as Innovation Hub, Regtech and Cryptoassets Task Force aim to reduce costs associated with compliance.
- Innovation Hub / Regulatory Sandbox – The Innovation Hub helps FinTech firms to navigate the regulatory space by assisting with applications and providing FinTechs with an understanding of there regulatory frameworks. The Regulatory Sandbox enables FinTechs to develop prototypes that are compliant with regulatory requirements.
- Regtech – This is a FCA initiative that uses technology to enable higher efficiency in regulatory reporting. This will help the UK FinTech industry by making all rules machine – readable.
- Cryptoassets Task Force – This task force is comprised of HM Treasury, the Bank of England and the FCA. This task force will asses risks associated with cryptocurrency and the advantages of blockchain. This initiative is similar to the EU Blockchain Observatory and Forum which seeks to enable scalability and develop governance on blockchain.
- UK Workforce – The FinTech Sector Strategy aims to equip the UK workforce with digital skills such as coding to enable an expansion of FinTechs and encourage competition. For example, the FinTech Delivery Panel will partner with Barclays Bank plc to recruit and train those who are taking on new opportunities in FinTech.
- International and national expansion – The government is supporting international expansion of UK based FinTechs by setting up FinTech Bridges with Singapore, South Korea, China, Hong Kong and Australia. These bridges enable international opportunities and reduce barriers to entry by creating links between governments, the private sector and regulators. The strategy also outlines methods by which the government will expand the FinTech industry in the UK.
Another initiative developed by the FCA to ease the regulatory burden of the FinTech industry is the Global Financial Innovation Network (GFIN). This is a “global sandbox” comprised of regulators from Abu Dhabi, Australia, Bahrain, Canada, Dubai, Gurnsey, Hong Kong, Singapore and the United States. The GFIN aims to give firms access to regulators as new ideas are tested across marketplaces and intends to put new regulatory frameworks in place to enable innovation.
If you’re finding it difficult to navigate FinTech regulations or figure out which initiatives and resources are right for you, book a legal session with us and get connected to expert FinTech lawyers!