On February 8, Advapay held its next conference in Tallinn on “Digital Banking: Electronic Money and Cryptocurrency. Regulation vs technology”.

The venue was not chosen by chance, because Estonia is one of the most loyal states to the cryptocurrency and blockchain.

During the event, the guests discussed trends in the development of banking services and the payment market in 2019.

Dr. Ubertus Von Poser, Member of the Board of Directors of PPI AG, spoke about the future of instant payments: «Instant Payments is going global. More and more markets are implementing an Instant Payments scheme. The main project in Europe, SEPA Credit Transfer Instant, is gaining speed and volume. EBA Clearing, the Pan European Clearing house, for example passed the 10-million-transaction milestone at the beginning of 2019. The biggest business potential seems to be on the corporate side: instant payments at the point of sale or for any other b2c business. The biggest challenge banks face is implementing a infrastructure that is running 24x7x365, has no downtimes and is able to process large volumes in real time».

Special attention was paid to the issue of Brexit and its implications for the European market. In his speech, Craig James, General Director of NeoPay Ltd., explained the UK exit options from the European Union under tough and soft Brexit scenarios. Projections for further regulation in the UK and key decision-making deadlines were also presented.

It is worth noting that the Craig James’ speech was the most expected, since NeoPay Ltd. is a leading expert in the UK, whose share is more than 80% of all payment companies in the European Union.

E-commerce and online payment issues were also addressed at the conference. According to George Kochegarov, legal adviser of PayAlly Limited, electronic commerce accounts for around 11.9% of total retail sales worldwide and this share is increasing on a year to year basis by around 10-15%. E-commerce is changing rapidly and some of the trends which were introduced in 2018 will continue growing throughout the upcoming years. Understanding those trends is important for both acquirers and e-commerce merchants as it allows to remain on top of the game.

The event was organized by Advapay.

“Every year we hold conferences that bring together representatives of banks, PSP and fintech companies from different countries of the world. We tried to bring together the most professional speakers with a very high level of reports. We also consider it important to give our guests the opportunity to find partners and expand business contacts, to get new contacts,” – says Maxim Ivanchenko, Advapay Founder and Canopus IT General Director.

The event took place at the comfortable Hilton Tallinn Park Hotel in the heart of the city. The conference was attended by guests from the UK, Germany, Switzerland, Belarus, Russia and the Baltic countries. 

The European Commission has bashed Mastercard with a EUR 570 million fine for obstructing merchant access to low-cost cross-border payment services.

The financial penalty flows from an anti-trust investigation which kicked off in April 2013 and concluded that Mastercard's rules prevented retailers from benefiting from lower fees and restricted competition between banks cross border, in breach of EU antitrust rules. 

The infringement ended when Mastercard amended its rules in view of the entry into force on new regulations of interchange fee caps in December 2015 

Prior to that, Mastercard obliged acquiring banks to apply the interchange fees of the country where the retailer was located. As a result, retailers in high-interchange fee countries could not benefit from lower interchange fees offered by an acquiring bank located in another Member State.

Commissioner Margrethe Vestager, in charge of competition policy, says: “European consumers use payment cards every day, when they buy food or clothes or make purchases online. By preventing merchants from shopping around for better conditions offered by banks in other Member States, Mastercard's rules artificially raised the costs of card payments, harming consumers and retailers in the EU.”

Source: https://www.finextra.com/

Advanced Fraud Solutions and Q6 Cyber have teamed up to integrate Q6 data feeds directly into the TrueCards fraud prevention software platform. 

TrueCards is a tool that allows financial institutions' fraud teams to proactively monitor card holder transactions for test sites, breaches, and common points of compromise (CPC). Moreover, Q6 Cyber has a unique approach to monitoring the ‘Digital Underground’, including the DarkWeb and DeepWeb, which allows the company to deliver targeted and actionable intelligence. This permits financial institutions to direct and prioritise resources against the most relevant threats and adversaries.

The integrated solution is meant to provide financial institutions with two benefits: it will proactively identify payment cards that have been hacked or compromised, well before such cards are ever used fraudulently, and secondly, it will automate the common points of compromise analysis, detecting breached merchants so that fraud investigators can stop, block, and reissue compromised or stolen cards.

Source: https://www.thepaypers.com/

As countries around the world became ambivalent about accepting cryptocurrency and blockchain technology, a small country in the Mediterranean Sea started writing rules that offered legal certainty in a space that had been unregulated. Malta was one of the first countries to regulate the crypto industry and offer legal framework for its application. Following this news many businesses, exploited the opportunity and moved their headquarters to Valletta, country’s capital.

Crypto exchanges were amongst the industries which benefited the most out of this deal, as the VFA (Virtual Financial Act) finally enabled their legal operation.

Maltese government divided the licences into 4 categories, encompassing different areas and organizations:

- Class 1: Simple consulting and placement of VFAs

- Class 2Offering VFA services except those dealing on one’s own account or offering an exchange

- Class 3: Licence for any type of VFA service but a VFA exchange

Class 4: The licence for VFA Exchanges 

Licence applicants must show to the MFSA (Malta Financial Service Authority) that they possess sufficient capability, coherence, and solvency to run the exchange.

The MFSA rules impose tough liquidity requirements on all licensees. They also have to ensure they have no conflict of interest. They must also have a compliance officer that will be responsible to draft a compliance certificate on a periodical basis.” — Joseph F Borg

As previously stated, the licence process for a crypto exchange in Malta is classified as VFAA Class 4, and its application process is divided into the following 3 phases:

1. Preparatory Phase

2. Pre-Licensing Phase

3. Post Licencing & Pre-Commencement of Business


PREPARATORY PHASE: The applicant chooses a VFA agent and the VFA will inform the regulator (MFSA) that a client would like to apply for a licence.

This “information” is actually a lot more than just an email, as it should contain already the business plan and a clear picture who the applicant isand who the persons / roles are that should hold positions in the new company (only key persons and key roles, like directors, shareholders, CFO, compliance officer, etc.)

It can make sense to have a company set up for the application. Also, what should be included in this first approach is a legal opinion, that the application is in fact for a crypto exchange and not, for example, a MiFID exchange
 After reviewing the email and the supplied information, the MFSA will invite the key persons to Malta. The VFA agent and the client will attend the meeting and will make the best impression. This meeting is mandatory.
 As soon as the meeting is concluded, the VFA agent has 60 days to submit the full application and the client needs to pay the application fee of 24’000 EURto the MFSA with the filing of the application.


PRE-LICENSING PHASE: Once the complete application is received and the fee has been paid, the MFSA will review the application. This will include a back and forth of questions and answers and the clients are advised to respond quickly, as otherwise momentum might be lost. 
 Once the regulator is principally satisfied, it will issue an “in principal approval”, which is “valid” for 3 months. Within these 3 months the client has to finalize all pending items and submit the original application. Pending items are, for example:

a. Set up the company

b. Open the company

c. Rent the office

d. Employ the staff

e. Pay in the share capital

f. Get the insurance

g. Buy the servers

h. Pay the hosting

On top of these, VFA providers require a range of procedures and policies which are necessary for the project’s assessment and final evaluation:

i. Information and data security policy

ii. AML Policy

iii. Privacy Policy

iv. Business Continuity Policy

v. Accounting Policies & Procedures

vi. Personal Transaction Rules

vii. Cyber Security Framework

viii. VFAs and VFA Service Policy

ix. Remuneration Policy

x. Risk Management Policy

xi. Internal Audit Plan

xii. Insurance Policy

xiii. Disaster Recovery Plan

xiv. Outsourcing Policy (if applicable)

xv. Internal Liquidity Management Policy

xvi. Conflict of Interest Policy

xvii. Categorization of Clients Policy

xviii. Complaints Management Policy

xix. Order Execution Policy

xx. Client Order Handling Rule

Very important: Since the 3 months can be “short”, it makes sense to have some aspects (like company, bank account etc) ready beforehand.

Once all “issues” from the “in principal approval” are solved, the licence is issued.


POST-LICENSING AND PRE-BUSINESS COMMENCEMENT OF BUSINESS: Licence holders MAY be required, even so the licence has been issued, to comply with conditions by the MFSA before the commencement of the business.

Overall the process will take at least 12 months for its completion.

Wide exploitation and business allocation

Once Maltese regulations were authorized by the government, two biggest exchanges worldwide allocated their offices and headquarters to Malta. Binance, being the largest cryptocurrency exchange platform volume-wise moved its offices from Asia-Pacific to Malta. The operation of Binance in the Asia-Pacific theater has been coming under increased scrutiny from regulatory bodies. In both Japan and Hong Kong, the company has had to deal with a number of issues with the regulatory agencies in these countries. Blockchain utopia which positioned itself as a crypto hub, Malta welcomed Binance with open arms and its Prime Minister Joseph Muscat congratulated people behind the Binance himself.

Second biggest exchanging platform, namely OKEx, also moved its offices in Malta.

“Malta’s Virtual Financial Asset Act is a solid foundation for the industry and the government to work together in fostering the nascent blockchain/digital asset industry. More specifically, Malta’s sound risk-based approach will help cultivate a responsible, compliant, and healthy ecosystem,” explained by Tim Byun, chief risk officer and head of government relations at OKEx.

These clearly defined protocols and procedures Malta introduced for regulating and making space for blockchain and crypto organizations, paved the way not only for big sharks who wanted to exploit the legal hub, but also to other, smaller organizations and businesses. Hosting providers, Payment gateway providers, iGaming operators, Legal advisors, Investment trading firms, Decentralized mobile network providers, ICOs, STOs, and Decentralized applications are just some of the areas that finally found a much sought-after safe haven.

Both Philipp Sauerborn and Joseph Borg endowed this article with legal steps imperative for its successful execution.

About CoinPoint:

CoinPoint is a premium marketing agency, founded in 2013, working with all scale businesses — from startups, presenting their businesses on a global level, to multinational companies looking for digital transformation & blockchain adoption. The agency stays on top by providing the best services and solutions to its clients around the world.

Source: https://medium.com/

The trade body for the UK's fund management industry, the Investment Association (IA), has extended its fintech accelerator initiative with the launch of a second cohort.

The Velocity initiative was launched in 2018 and has become the IA's fastest growing membership with more than 70 fintech firms signing up in the last six months, five of which comprised the first Velocity cohort in October 2018. 

"More than 30 outstanding fintech companies applied to join the first cohort and we look forward to receiving a similar high calibre of applicants for the second cohort," said Chris Cummings, chief executive of the IA. 

Prospective fintechs are invited to apply by Monday March 1 and the six month programme is set to begin in May. Features of Velocity include mentoring from a 24 man advisory panel and exposure to industry networks and potential clients, according to the IA. 

In addition to the IA's initiative, a number of global asset management firms have launched their own fintech accelerator programmes, in part to recruit new partners but also to encourage more innovation in an industry often seen as less forward-thinking and cutting edge than other financial services sectors and prone to disruption from more nimble and technology-based startups. 

Source: https://www.finextra.com/