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  • @fintechna 4:54 am on January 22, 2017 Permalink | Reply
    Tags: , , , , , , , Gambit, Passporting,   

    The Passporting Gambit 

    As it turns out, this past week was the wrong week to quit sniffing glue. You will be mistaken if you think I am alluding to various political gatherings that occurred first in the United States then all over the world. Nothing could be further from my mind. Of course I am alluding to the itsy-bitsy bit of news the Telegraph planted in this article. And before you believe I allude to the momentous piece of news where we learn President Trump refers to Prime Minister May as &;my Maggie&;, then you shall have to guess again.

    Let me put you out of your misery. I am referring to the &8220;&8221; system bombshell, and no, I am not referring to the EU passporting system. Let me put me out of my misery. I am referring to the US-UK passporting system bombshell, and I quote the Telegraph: &8220;Donald Trip is planning a new deal for Britain&; The historic trip comes as: &; A deal to reduce barriers between American and British through a new &8220;passporting&8221; system was considered by Mr Trump&;s team&8230;&8221;

    Try that on for size.

    Screen Shot 2017-01-21 at 11.30.12 PM

    I did and the thoughts swirling in my mind at the speed of light ended up making me dizzy.

    First, given this is the Telegraph, I discounted the possibility of fake news. Second, we all know Trump has not been tender with the EU, so the possibility of sticking it to European countries by weakening them and creating further uncertainty cannot be discounted entirely. Third, Trump has now put the world on notice we have entered a new era of bilateral deals and America first, and a special deal with the UK, on the back of the Brexit vote and what can only be tense negotiations with the EU certainly fits the bill. Fourth, such a passporting system may benefit US banks in light of the threat Brexit poses them by coupling London and NYC as capital markets brethren &8211; do note that several Trump nominees are former Goldman Sachs partners, most notably the Treasury Secretary nominee. Fifth, the US and EU have had recent trade disagreements, notably around the safe harbor agreement on overseas data transfers, thusly a banking passporting system threat may be a useful bargaining chip with the EU in the near future. Sixth, any weakening of the EU may further Trump&8217;s plan for rapprochement with Russia &8211; arguably the UK &8220;elite&8221; is not on the same wavelength. Seventh, we may be witnessing a Trump judo move aimed at softening the EU intransigent stance and, indirectly, secure more favorable Brexit terms for the UK, especially for the financial services industry &8211; this would indeed be masterful. Eighth, could this move be part of the upcoming currency wars &8211; surely this piece of news has the potential of strengthening the pound and weakening the Euro this coming week. I am sure we can come up with many more potential meta reasons for this move and I am looking forward to your comments and ideas.

    Let&8217;s us now switch to more practical matters. How easy would it be to build a financial services passporting system between the US and the UK. Fairly easy on the UK side given there is only one financial regulator, the FCA. Less so on the US side given we are dealing with several federal regulators (the OCC, the Federal Reserve, the FDIC, the CFPB, FinCen to name the main ones) and 50 state regulators on the banking side, as well as 50 state examiners on the insurance side. Quite a complicated landscape. For those who have followed the push back state regulators made recently once the OCC revealed its plans for a charter, think of the issues raised by a federal level passporting system pushed by the Trump administration. Obviously, we will need to figure out the details of a potential passporting system. Will it cover only banks, and if so apply only to national charters on the US side? Will it cover broker/dealers, asset managers, payments companies and even startups too, let alone insurers? How wide will be the mandate, how deep? The devil will be in the details, as usual.

    It is a truism to state that trade deals covering products are &8220;easy&8221; to ink, not so with services and last I checked banks or insurers are in the financial services industry. I am no expert but I suspect current international trade treaties will have to be scrutinized to analyze potential conflicts or limits &8211; to be broken or renegotiated? We should also think of any implication and consequences, intended or not, with Basel III and other global financial services accords.

    Further, UK financial regulators have historically had a principles based approach vs the US regulators&8217; rules based one. Two things to note here: a) UK financial regulation is based off of and integrated with EU directives and laws, and b) US regulators have recently toyed with the idea of moving towards principles. Be that as it may, it is clear a US-UK deal that includes a passporting system for financial services industry participants will have to wait for the UK to disentangle itself from the EU.

    A few other thoughts intrigue me. We all know the FCA&8217;s ground breaking initiative with its approach to fintech and financial innovation in general and its sandbox in particular. If a passporting system allows for a transfer of knowledge and purpose and US regulators espouse new ways to engage with and innovation, then I am all for it &8211; note to all, US regulators abhor the word &8220;sandbox&8221;. As my friend Mariano Belinky from Santander InnoVentures stresses, the US banking market is saturated, certainly so on the retail side. It is also fragmented. The UK banking market is highly concentrated. What would be the consequences of passporting for both markets on the retail side? The US banking market has seen few if not any new banking licenses granted of late. New entrants spur innovation and competitions is, in my opinion, somewhat stale in the US. On the other hand, the FCA has now allowed a certain number of challenger banks in the UK to foster innovation and enable competition. If another byproduct of passporting means the US shores will see more challenger banks, I am all for it. Finally, if passporting talks usher an era of simplification and integration between US regulators, as well as be the impetus for global regulatory rethinking, then I will become a huge fan &8211; London+NYC is a rather formidable financial services axis. The deregulation touted by Trump may not be enough alone to usher a new regulatory era in the US. Add a new alliance to the anticipated demise of Dodd Frank and all bets are off. On the other hand, I wonder if the FCA is or will be a champion of deregulation for deregulation&8217;s sake. If smart deregulation ends up permeating both sides of the Atlantic while speaking a different but common language &8211; regulatory and linguistically speaking &8211; then I am all for it.

    Be that as it may, and we need to be cautious given we know so little, we can say the possibilities are as endless as the volatility created by this announcement is high. On the other hand, this may turn out to be one of many crazy ideas without a future. Welcome to a fascinating 4 years trip.


  • @fintechna 3:35 am on September 19, 2016 Permalink | Reply
    Tags: , , , , , , , , , Passporting, sandboxing,   

    BREXIT – A Catalyst For Blockchain Technology? 

    — this topic has been in everyones mind for the prior weeks as I traveled across Germany and the US, not only in financial services. Nevertheless, today the first shock in financial services has gone and according to my opinion the Brexit has the potential to become THE game changer for implementing — fast track. Not only in financial services.

    &;We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten.&; &; Bill Gates

    But why? Currently London is to the European Union as Manhattan is to the United States. But why is London so important for Financial Services in Europe? European finance depends on the „City“, not to mention London’s dominance of financial services in UK: London is representing 9.6% of the United Kingdom’s GDP. Globally the FCA is one of the most innovative regulators, not only in terms of and for Startups. According to my opinion, passporting, sandboxing and a new EU bureaucratic for the UK could be the game changer in terms of Blockchain.

    First: What’s passporting?

    To break it down: when you get a license for financial services in one country, you are able to passport this license to other countries, meaning you don’t have to spend money on applications for each country, learning different languages and wait to got through the bureaucratic application processes for all the European member states. A great approach for global acting financial institutions — with this approach London established itself as a financial service gateway to the European Continent.

    Second: What&;s sandboxing?

    The UK regulator, the FCA, established a safe space for FinTech startups, where businesses can test innovative products, services, business models and delivery mechanisms. Means building new businesses in a live environment without immediately incurring all the regulatory consequences. Linked to this approach for FinTech Startups, the FCA established a safe space for Blockchain Startups early 2016 as well. Blockchain Startups should experiment in a safe environment with financial service technology. All the efforts are underlined by the support of the Central Bank of England — the Central Bank of England has taken steps to explore the potential of Blockchain Technology as well.

    Third: This brings me to the point >> passporting, sandboxing and a new EU bureaucratic for the UK could be the game changer in terms of Blockchain and Brexit, but why?

    Taking the real opportunity for the UK and the European Union is to use the current time of uncertainty of leaving the EU to take action. Action in terms of implementing a new technology. For instance currently it is rather uncertain that global will keep the passportability of their licenses as well as staying in the UK. Banks need new incentives for staying in the UK.


    From Pixabay

    To break it down shortly — incentives for Banks and the UK in relation to Blockchain could be (extract):

    &8211; Value Innovation — using sandboxing for establishing new standards to record, exchange, and trade assets as well as liabilities. Replacing traditional exchange and centralized markets as well as lowering barriers for business creation

    &8211; Re-Architecting the EU bureaucratic — implementing a document formation and management system for self-enforcing contracts (so called smart contracts) between the EU und UK

    &8211; Rebuilding Government and Democracy — rekindling the public’s trust in political institutions in the UK by establishing greater transparency and accountability in voting on the Blockchain

    New difficulties, but also great opportunities arise in our digital interconnected world between the EU and UK. London and the UK must act and innovate &8211; more than ever &8211; to ensure London’s preeminence as a global financial hub.

    The potential is big: the FCA has an innovative approach for Blockchain Startups and Banks — trial and error: this is unique in the European Union and might be one reason for Banks staying in the UK.


    From Pixabay

    sandboxing: this is unique in the European Union

    Nevertheless, the Brexit was a defeat for the European Idea, but every defeat makes you stronger, learn from the past, adapt the future, be innovative and just try. The Internet of Information was just the start, the Internet of Value has the potential for changing our whole life:

    Stand up Europe and implement the Blockchain Technology!

    Source: Own Research/ Ideas, Forbes, Fortune


    This article first appeared on LinkedIn Pulse. Featured Image: Pixabay

    The post BREXIT &8211; A Catalyst For Blockchain Technology? appeared first on Fintech Schweiz Digital Finance News – FintechNewsCH.

    Fintech Schweiz Digital Finance News – FintechNewsCH

  • @fintechna 6:59 pm on July 7, 2016 Permalink | Reply
    Tags: , Lemon, , Passporting, , , ,   

    Lemon Way Sees Passporting Opportunities Swell in Post-Brexit World 

    Way has aggressively expanded its payment network via crowdfunding around the EU.
    FinTech – Finance Magnates | Financial and business news

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