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Our Global Regulatory Network, consisting of former regulators and bankers from the Americas, Asia and Europe, provides strategic insights on financial regulation that helps clients adapt to the changing regulatory landscape.
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1. Geopolitical events and regulatory fragmentation are on the rise
During 2022, we saw a spike in geostrategic risk – most notably in terms of the war in Ukraine and US-China tensions. The world is becoming more concerned with national and regional security, reversing the globalization trend.
Some strategic rules and laws proposed or passed in recent years have been heavily influenced by considerations around strategic autonomy or wider political considerations. These include European Union (EU) third-country branches, financial data processing laws in India, and even opposing state-level policies regarding environmental, social and governance (ESG) in the US.
2. The economic environment and customer impact are at the top of regulatory agendas
Continuing a trend from 2022, difficult economic circumstances around the world are pushing conduct regulators to widen their focus beyond financial inclusion, to the broader concept of customer impact. This means not just ensuring that people have reasonably equitable access to financial products and services but assessing the overall impact of those offerings. Thus far, the UK has taken the biggest steps in this direction, with the Financial Conduct Authority’s new Consumer Duty rules,1 which take effect in 2023.
3. Digital assets will require greater oversight and clarity
The oversight of digital assets, including stablecoins and other crypto assets, continues to evolve; it will take time to establish the right level of regulatory clarity. The plunge in the price of most crypto assets in 2022 shows the scope of downside risks from crypto and the likely need to take some steps to protect investors.
In an effort to enhance that clarity, the EU has already provisionally agreed on a Markets in Crypto-Assets (MiCA) proposal that will standardize rules for crypto-assets, crypto-asset issuers and crypto-asset service providers across the EU.2
In addition, there is growing agreement that stablecoins should be 100% backed by fiat currency, resulting in greater transparency and disclosure. Central bank digital currencies (CBDCs) are another rapidly evolving area. Most governments are not close to issuing a CBDC, with a handful of exceptions, but we can see growing interest from central banks around the world.