The Paper, published on July 5, is based on the input of 75 jurisdictions and gives a thorough overview on how non-bank payment service providers (NBPSPs) are regulated to help them determine their regulatory perimeter.
The Paper indicates that payment systems include a wide range of NBPSPs and distinguish between retail services at the “front end” vs roles played by entities in clearing, settlement and processing at the “back end”.
The Paper also finds that e-money services are currently the most intensively regulated payment services offered by NBPSPs can offer while the provision of virtual asset services is the least. Both payment services are mainly subject to AML/CTF rules.
Key takeaways include the following:
Non-banks are able to offer “mature” or traditional payment services in most jurisdictions: With the provision of e-money accounts and processing of electronic funds for third parties being the most common payment services provided by NBPSPs.
E-money issuance is subject to the most intensive regulation, and the provision of virtual asset services the least: licensing; registration; capital requirements; security deposits at central banks; ownership restrictions; mandatory partnerships with banks; safeguarding of customer funds; risk management; cyber security; AML; consumer protection; data protection; and interoperability.
On average, NBPSPs in emerging markets and developing economies are more intensively regulated than those in advanced economies when it comes to acquiring payment transactions, e-wallet services and e-money issuance.
AML/CFT requirements are the most common across payment services and jurisdictions, and interoperability the least common.
Regulatory requirements for payment services provided by non-banks may be applied in a differentiated manner (authorisation – licensing/registration, safeguarding of funds and other security requirements, interoperability) or a uniform manner (AML/CFT, risk management and cyber security, data protection, consumer protection).
The Paper also provides an overview of the emerging regulatory approaches regarding cryptoassets, including stablecoins which is summarized below.
Regulatory responses to cryptoassets, including stablecoins, are in flux and vary widely: issuance of warnings to investors and consumers, clarification of the regulatory treatment of cryptoassets and related activities, and implementation of crypto-specific licencing, authorisation and registration regimes.
Most jurisdictions do not have regulations that are specific to stablecoins. Although existing regimes do apply in whole or in part to stablecoins, which most of the time are classified as e-money.
The regulatory treatment of a stablecoin depends on its features and how it is set up: stablecoin used as a means of payment or exchange (payment token), as an investment instrument (security token), or as a means of granting its holders access to a digital platform or service (utility token).
Stablecoins are mainly subject to AML/CFT.
At the international level, global standard-setting bodies are acting on stablecoins. This comprises FSB’s regulatory recommendations on “global stablecoin” arrangements (GSCs), FATF’s report on AML/CFT issues relating to stablecoins (see our summary) and IOSCO’s report on the possible implications of global stablecoin initiatives for securities markets regulators.