The Bank of Canada has issued a report on Project Jasper, its recently completed experiment testing the viability of distributed ledger technology (DLT) as the basis for a wholesale payment system. The experiment was a combined effort by the Bank of Canada and Payments Canada, along with Bank of Montreal, Canadian Imperial Bank of Commerce, HSBC, National Bank of Canada, Royal Bank of Canada, Scotiabank and TD Canada Trust. The experiment revealed that such technology is not more beneficial, at least for now, than the current centralized system of wholesale payments. However, the successful proof-of-concept highlighted best practices for wide-scale … Continue Reading
In an effort to help regulated entities and interested parties evaluate whether the use of distributed ledger technology (DLT) would enable them to meet their regulatory obligations and to fast-track its discussions with stakeholders, the Australian Securities and Investments Commission (ASIC) has released an information sheet, “Evaluating Distributed Ledger Technology” (INFO 219), offering guidance for entities licensed by ASIC and start-ups that are “considering operating market infrastructure, or providing financial or consumer credit services” using DLT or blockchain.
Noting the “intense interest in DLT” ASIC is seeing from a wide range of financial services market players in recent … Continue Reading
On March 13, 2017, the Council of the Corporation Law Section of the Delaware State Bar Association released proposed legislation that would amend Title 8 of Delaware’s General Corporation Law (DGCL) to permit Delaware corporations to use blockchain technology to create and manage corporate records.
Currently, stock ledgers in Delaware corporations are typically maintained by a corporate secretary or transfer agent, who manually updates the ledger upon receipt of notification of a transfer of share ownership. The proposed amendments would permit Delaware corporations to use electronic networks or databases, such as distributed ledgers, to administer corporate records and track share … Continue Reading
The Ontario Securities Commission (OSC) has issued a press release advising stakeholders that Ontario securities law may apply to any use of distributed ledger technologies (DLT), such as blockchain, as part of financial products or service offerings.
The OSC emphasized that it is keen to support the innovative potential of DLT because, among other things, DLT has the potential to increase transparency and efficiencies in the capital markets. However, because of DLT’s novelty, the OSC encourages business to speak to the OSC about securities law and investor protection requirements that may apply.
The OSC has cautioned that “[p]roducts or other … Continue Reading
Le 23 février 2017, les Autorités canadiennes en valeurs mobilières (ACVM) ont annoncé le lancement d’un bac à sable réglementaire. L’objectif du bac à sable réglementaire est d’appuyer les Fintech en leur permettant de faire une demande à l’organisme de réglementation compétent afin de bénéficier d’une approche plus adaptée en matière de réglementation. Cette approche doit faciliter l’utilisation d’applications, de produits et de services novateurs chez les entreprises au Canada, tout en protégeant adéquatement les investisseurs.… Continue Reading
On February 23, 2017, the Canadian Securities Administrators (CSA) announced the launch of a regulatory sandbox. A regulatory sandbox aims at supporting Fintech businesses by allowing them to apply to the regulator to benefit from a more tailored approach to regulation that balances the need to facilitate the use of innovative products, services and applications all across Canada with appropriate investor protection.
As a result, the CSA will assess the merits of each business model, on a case-by-case basis, and allow innovative businesses to register or grant them relief from certain requirements to permit them to test their products and … Continue Reading
Fintech companies are offering game-changing products and services in the financial services sector, responding to customer demand for frictionless technology. Canadian banks are likewise increasingly seeking to offer innovative products and services. In addition to developing such products and services in-house, banks have been partnering with Fintech companies, seeking to leverage their technological know-how and cost-effective offerings. Fintech companies in turn seek to leverage banks’ customer relationships, their reach and experience and their expertise in compliance and risk management. Partnerships between Canadian banks and Fintech companies increased in late 2015 and 2016, and this trend is expected to continue. Some … Continue Reading
This year was a tremendously active year for Fintech in Canada and internationally, and 2017 promises to be even more so. In the Fall of 2016, we co-authored a comprehensive report together with the Digital Finance Institute, “FinTech in Canada: British Columbia Edition” on the state of the Canadian Fintech ecosystem, highlighting a number of the then-current industry and regulatory developments. As we head into 2017, we provide a brief summary of some of last year’s Fintech regulatory developments in Canada and globally, and some developments to watch for in the upcoming year.… Continue Reading
On December 6, 2016, Bill 47 – Protecting Rewards Points Act (the “Act”), amending Ontario’s Consumer Protection Act, 2002 (the “CPA”), received Royal Assent. The Act was first introduced on October 20 as a private member’s bill.
The primary effect – and stated purpose – of the Act is to prohibit the expiry of rewards points under consumer agreement due to the passage of time. Any provision to the contrary in any consumer agreement will be rendered void, with retroactive effect to October 1, 2016, such that all points purporting to expire after October 1, 2016, will need to be … Continue Reading
On December 2, 2016, the United States’ Office of the Comptroller of the Currency (OCC) announced that it would move forward with considering applications from Fintech companies to become special purpose national banks. The OCC also published a paper discussing the issues and conditions that it will consider in granting special purpose national bank charters (the “OCC Paper”).… Continue Reading
On December 1st, the Ontario Government announced it was launching consultations seeking public input to identify any “unclear, outdated, redundant or unnecessarily costly” financial services or insurance regulation in Ontario, with the aim to modernize and improve such regulation and achieve a regulatory regime that supports innovation and growth, while at the same time protecting the public interest. These consultations specifically include the following:
- Provincial credit union legislation
- Provincial mortgage brokering legislation
- Provincial loan and trust corporations legislation
- Provincial insurance legislation
- the Financial Services Commission of Ontario (“FSCO”) Act.
The consultations come as Ontario is in the process … Continue Reading
With 10,000+ attendees, including more than three thousand companies from seventy-five countries, Money20/20 is the largest annual global event focusing on payments and financial services innovation. The 2016 conference in Las Vegas this October featured a packed agenda of talks by industry and thought leaders on a broad range of current and emerging Fintech issues, as well as an exhibition area featuring Fintech companies, investors, incubators, venture capitalists, consultants, regulators and lawyers. A team of McCarthy lawyers attended again this year and report back on some of the hottest topics of the 2016 conference: machine learning and artificial intelligence (AI), … Continue Reading
The Financial Action Task Force (FATF) released its Mutual Evaluation Report (the “Report”) for Canada on September 1, 2016, outlining its assessment of current anti-money laundering (“AML”) and counter-terrorist financing (“CTF”) measures in Canada. The FATF is an independent inter-governmental body that develops and promotes global AML/ CTF policies and sets global standards. This Report assesses Canada’s level of compliance with the FATF 40 Recommendations and the level of effectiveness of Canada’s AML/CFT regime.
The prior 2008 Mutual Evaluation Report issued by the FATF rated Canada as non-compliant in a number of areas. Since then, a number of amendments to … Continue Reading
Canada’s Commissioner of Competition, John Pecman, spoke on October 6th, 2016 to the Canadian Bar Association’s Competition Law Fall Conference, addressing the link between competition and innovation and providing updates on the Fintech market study launched by the Competition Bureau earlier this year.… Continue Reading
McCarthy Tétrault was a sponsor of the recent 2016 Canada FinTech Forum held in Montreal on September 20-21, 2016. Steve Forbes was the conference’s keynote speaker. McCarthy’s introduced the excellent conference panel on blockchain in the financial services industry, with Haskell Garfinkel (PWC) as moderator and Jerry Norton (CGI UK), Todd McDonald (R3), Sujan Menezes (Microsoft) as co-panelists. The number of attendees at the conference more than doubled over the 2015 conference, demonstrating the ever-growing level of interest in the nascent FinTech industry for both start-ups and incumbents. Below, we set out a high level summary of some of the … Continue Reading
Although many of the same considerations related to the acquisition or sale of any technology company apply, regulatory and compliance considerations are key in the fintech space.
Fintech M&A activity, in both the Canadian market and globally, is expected to be on the rise over the next few years. In its 2016 Report, FinTech: Prepare for a Wave of M&A, UK-based investment bank FirstCapital, predicts that fintech M&A deal flow will increase “as financial incumbents look to catch up with widespread innovation from new entrants, the internet majors scale up in financial services and the technology/software majors add new … Continue Reading
In response to the U.S. Department of the Treasury’s (“Treasury”) July 20, 2015 request for information on online marketplace lending (the “RFI”), Treasury issued its white paper on marketplace lending “Opportunities and Challenges in Online Marketplace Lending” (the “White Paper”) on May 10, 2016. The White Paper outlines the risks and potential of this emerging form of credit, makes specific policy recommendations and identifies certain trends for future monitoring.
The White Paper defines marketplace lending as financial services that use “investment capital and data-driven online platforms to lend either directly or indirectly … Continue Reading
The Competition Bureau announced on May 19, 2016 that it will launch a market study focused on how innovation in the fintech sector is impacting consumers and businesses, with the results intended to be published in the spring of 2017, seeking to determine whether there is a need for “regulatory reform to promote greater competition while maintaining consumer confidence in the sector.”
The announcement cites a report indicating that Canada appears to be lagging other countries in adoption of fintech as one of the reasons for deciding to study the financial services industry.… Continue Reading
The payments space is undergoing a period of rapid innovation, resulting in traditional financial institutions competing more and more directly with large technology companies such as Apple, Google, Samsung and Facebook. Unsurprisingly, various players in the payments industry have been filing patents to protect their proprietary technologies for various payment functionalities, ranging from central elements of a payment transaction (such as core payment processing algorithms), to other ancillary, but necessary, aspects of a payment transaction, such as authentication and tokenization methods.… Continue Reading