Key developments of interest over the last month include: a new Bill containing detailed new information and account direct deduction obligations for banks and EMIs being introduced to the UK Parliament; the issuing of a United States Executive Order outlining the new Administration’s policy on digital assets including a ban on CBDCs, as well as both chambers of the U.S. Congress presenting drafts of legislation for regulating stablecoins; and the Hong Kong Securities and Futures Commission outlining a 12-point strategy to boost Hong Kong’s virtual asset market.

In this Newsletter:

  • Key recent Hogan Lovells publications
  • Regulatory Developments: Payments
  • Regulatory Developments: Digital Assets
  • Market Developments
  • Surveys and Reports

For previous editions of the Payments Newsletters, please visit our Financial Services practice page.

Chapter 1

Key recent Hogan Lovells publications

STOP PRESS: EU payments: What's in the regulatory pipeline for 2025?

We have put together this publication looking at key topics that should be on the regulatory “to do” list for payments industry players in 2025. As well as highlighting upcoming compliance deadlines (for example under the European Accessibility Act and the Instant Payments Regulation), we also provide a snapshot of some existing areas of focus to be aware of – and some that are still taking shape (notably PSD3/PSR, the FiDA proposal and the digital euro project).

Some other recent Hogan Lovells publications of particular relevance to digital assets developments include:

  • The EU’s Markets in Crypto-Assets (MiCA) Regulation: a status update: We have produced an article summarising recently published Level 2 and Level 3 texts supplementing MiCA, as well as a tracker monitoring the status of all such texts.
  • A Tale of Two CBDCs: e-CNY v. Digital Euro: We have published an article that compares the People’s Bank of China’s digital yuan (e-CNY) with the digital Euro, its counterpart in the European Union, and explores the implications of the e-CNY’s current and planned use cases. It is the first in a series of articles exploring the development of CBDCs across the globe.
  • Comparative Guide: Regulating Staking: In our latest Comparative Guide, we give a brief overview of staking services, and relevant regulatory considerations.

You can sign up to receive our payments and digital assets related publications directly via the Our Thinking section of hoganlovells.com

Chapter 2

Regulatory Developments: Payments

United Kingdom: New Bill containing detailed new information and account direct deduction obligations for banks and EMIs introduced to Parliament

The Public Authorities (Fraud, Error and Recovery) Bill was introduced to Parliament on 22 January 2025.

The Bill includes powers for the Minister for the Cabinet Office and the Department of Work and Pensions (DWP) to issue ‘account information notices’, ‘general information notices’, ‘further information notices’ and ‘direct deduction orders’ to banks and e-money institutions (EMIs) in relation to recovery of fraudulent or erroneous payments from accounts.

There is also a DWP power to issue ‘eligibility verification notices’ to banks and EMIs regarding the checking of eligibility criteria for certain State benefits.

There would be fines (including daily default fines) for no, incorrect or late compliance with the proposed new requirements.

Key points for banks and EMIs to consider include:

  • The impacts of the proposed new requirements to comply with information notices and account direct deduction orders on their policies, procedures and controls. For information notices, this includes:
  • assessment of the accuracy and/or complexity of the requirements of the notice and the ability of the bank or EMI to comply within the timeframe prescribed in the notice; and
  • consideration as to whether an appeal needs to be raised to amend or clarify the requirements of the notice, or to extend the prescribed deadline.

In relation to the direct deduction orders, this includes:

  • amendments to account terms and conditions to reflect these restrictions;
  • processes and controls for managing risks arising in respect of these orders, including those relating to applying “inhibits” immediately upon receipt of the order and managing relationships with vulnerable customers; and
  • the effectiveness of complaints handling procedures to manage customer conversations relating to sensitive or severe financial hardship arising from direct deduction orders.
  • How they will be able to comply with the proposed eligibility verification notices’ requirements in practice, and how the information identified through these checks impacts existing financial crime control frameworks.

The Bill’s Committee stage in the House of Commons began on 25 February 2025.

If the Bill is passed, banks and EMIs will likely face material implementation costs and risks of reputational harm. For more on this development, take a look at our article.

United Kingdom: FCA Portfolio letter for payments portfolio firms

On 3 February 2025, the FCA published a portfolio letter setting out its supervisory and policy priorities for payments portfolio firms, including payment institutions (PIs), electronic money institutions (EMIs), and registered account information service providers (RAISPs).

The FCA states that since its letter of 16 March 2023 highlighting its priorities for payments firms, it has seen improvements by firms to deliver the outcomes it set, for example in some firms’ Board and governance arrangements, risk management frameworks and customer outcomes. However, there is still room for improvement. It sets out three key outcomes for firms which it believes are essential to good customer outcomes:

  • Effective competition and innovation to meet customers’ needs, characteristics and objectives: Consumer Duty implementation remains subject to FCA ongoing monitoring and, where necessary, action.
  • Firms do not compromise financial system integrity: FCA focus areas include, in particular, financial crime and operational resilience.
  • Firms keep customers’ money safe: Areas of focus are safeguarding, prudential requirements and wind-down planning.

In addition, the FCA describes weaknesses in governance, oversight and leadership as the ‘root cause’ of many of the regulatory issues it sees in the portfolio. It expects firms, among other things, to ensure that their governance arrangements and systems and controls, including reporting mechanisms, are effective and proportionate to the nature, scale, and complexity of the business, and the risks to which it is exposed (also relevant to financial crime and operational resilience considerations).

United Kingdom: FCA and PSR publish joint feedback statement on BigTech and digital wallets

On 19 February 2025, the FCA and the Payment Systems Regulator (PSR) published a joint feedback statement (FS25/1) on responses to their July 2024 joint call for information (CfI) on big technology firms (BigTech) and digital wallets (see our article on the CfI).

Key points include:

  • The majority of stakeholders view digital wallets as posing a significant benefit to consumers, including in respect of innovation and non-card forms of payment.
  • Potential issues identified by stakeholders, together with proposed next steps, include:
    • Deficiencies in competition between digital wallets: The FCA and the PSR will work closely with the Competition and Markets Authority (CMA) as it reviews digital wallets within its investigations into two major mobile ecosystems (and they have shared their related findings in a letter to the CMA);
    • Barriers to effective competition between payment systems within digital wallets: The FCA and the PSR will work with the CMA to understand how any interventions to address competition between digital wallets could impact competition between payment systems.
    • The impact of operational failures of digital wallets on financial system resilience, as well as gaps in the current regulatory framework: Some stakeholders suggested that the provision of digital wallets could be brought within the FCA's regulatory perimeter, while others warned against prescriptive regulation. The FCA will seek to engage with HM Treasury (HMT) to consider these issues as part of its review of the Payment Services Regulations 2017 and the Electronic Money Regulations 2011.

The feedback statement also highlights opportunities that could be achieved through the wider adoption of other digital technologies (for example, digital identity verification services and a digital pound).

The FCA and the PSR are not planning new in-depth work, but will work with the CMA and HMT, among others, to monitor developments.

European Union: ECB decision on non-bank PSPs' access to central bank operated payment systems and central bank accounts published in OJ

On 6 February 2025, Decision (EU) 2025/222 of the European Central Bank (ECB) on access by non-bank payment service providers to ECB operated payment systems and central bank accounts was published in the Official Journal of the EU.

The ECB published a policy, in July 2024, developed with the Eurosystem to help it adopt a harmonised approach to access by non-bank payment service providers (NB-PSPs) (which include payment institutions (PIs) and electronic money institutions (EMIs)) to all central bank operated payment systems (that is, TARGET and retail payment systems operated by euro-area national central banks). The policy defined the approach on the access to accounts. The policy document noted the ECB's plans to publish a related ECB legal act.

The decision gives effect to that policy. Among other things, it:

  • Sets out the conditions an NB-PSP must meet to qualify for access to Eurosystem central bank operated payment systems;
  • States that Eurosystem central banks will not offer safeguarding accounts to NB-PSPs, as it is not a core function of central banks to act as a substitute for credit institutions in providing safeguarding services;
  • Specifies rules relating to maximum balance on the account holder's settlement account at the close of each business day.

The ECB adopted the decision on 27 January 2025 and it will enter into force on 26 February 2025. It will apply in member states from 9 April 2025 (aligning with the date on which member states are required to transpose amendments to the Settlement Finality Directive and PSD2 effected by the Instant Payments Regulation).

European Union: EBA repeals guidelines on major incidents reporting under PSD2

On 17 January 2025, the European Banking Authority (EBA) announced in a press release that it has repealed its guidelines (EBA/GL/2021/03) on major incident reporting under the revised Payment Services Directive ((EU) 2015/2366) (PSD2).

The EBA explains that it is repealing the guidelines to simplify major incident reporting requirements and to ensure legal clarity for payment service providers (PSPs), given that the harmonised reporting requirements under the Regulation on digital operational resilience for the financial sector ((EU) 2022/2554) (DORA) apply from 17 January 2025. The incident reporting requirements under DORA apply to financial entities across the banking, securities, insurance and pensions sectors, and cover most PSPs. DORA also disapplies the incident reporting requirements under PSD2 for those PSPs.

In the UK, Payment Services Regulations (PSRs) 2017 requirements are still in force and refer to the 2017 incarnation of the EBA rules that have just been repealed. The Bank of England, PRA and FCA are consulting on incident reporting in the context of third party arrangements (closing 13 March 2025).

These consultations concern proposed arrangements for reporting certain “operational incidents” to the regulators which are intended to be “interoperable” with DORA and the Financial Stability Board Format for Incident Reporting Exchange. However, the FCA consultation makes it clear that its proposed requirements do not replace firms obligations to make notifications under the PSRs 2017, which implemented PSD2. The FCA does not expect all PSD2 notifications will meet the thresholds for reporting incidents under its proposals. There may therefore be instances where firms will be required to report an incident under the current proposals in addition to a PSD2 notification.

European Union: European Commission confirms narrower scope of e-money acceptance under EMD2

In a recent response to an EBA Q&A, the European Commission has stated that the condition of acceptance in the definition of e-money in the second E-Money Directive (2009/110/EC) (EMD2) requires both (i) conversion of funds received by the e-money issuer into electronically or magnetically stored money (transferability) and (ii) a direct contractual arrangement between the third party payee and the issuer (voluntary acceptance).

In this response the Commission stated that the mere reception by the third-party payee of funds (‘scriptural money’) resulting from the redemption of e-money does not meet the acceptance criterion.

Whilst the response referenced existing ECJ case law, the Q&A appears to go a lot further. Taken at face value, it could change the way firms in this sector are regulated.

As a response in a Q&A, the Commission's view is not binding; however, we recommend this is something that firms should keep under review.

For more on this development, take a look at this Our thinking article.

European Union: EBA final report and draft ITS on reporting of charges data for credit transfers under SEPA Regulation

On 4 February 2025, the EBA published its final report containing draft implementing technical standards (ITS) on uniform reporting templates relating to the level of charges for credit transfers and shares of rejected transactions under Article 15(5) of the SEPA Regulation ((EU) 260/2012). The EBA consulted on the draft ITS in July 2024.

The draft ITS, set out in section 3 of the report, standardise reporting from payment service providers (PSPs), requiring them to report to their national competent authorities (NCAs):

  • The level of charges for regular credit transfers and instant credit transfers with breakdowns by type of transfer (national and cross-border), type of payment service users, type of payment initiation channels and by party that is subject to the charge; and
  • Charges for payment accounts, as well as the share of instant transfers, both domestic and cross-border, that were rejected due to the application of EU-wide restrictive measures.

Annex I to the ITS contains the reporting templates, with accompanying instructions for PSPs in Annex II.

Given the responses it received, the EBA has decided to postpone the first harmonised reporting deadline by 12 months, to 9 April 2026, and subsequent reporting from NCAs to the EBA and the European Commission to 9 October 2026. This will allow sufficient time for the Commission to adopt the draft ITS and for the EBA to develop taxonomy, datapoint model and validation rules, which it will do by Q2 2025.

Until the first reporting deadline, NCAs should deprioritise collecting data from PSPs and discourage institutions from providing unharmonised data until the taxonomy, datapoint model and validation rules are available. NCAs should not take enforcement action against PSPs that do not report in 2025.

Australia: Banks urge Parliament to modernise payment system regulation

On 4 February 2025, the Australian Banking Association (ABA) published a press release urging Parliament to pass legislation to ensure digital payments are adequately regulated. The ABA notes that the current laws were made in 1998 when cash and cheques were the dominant methods of payment and Australia is lagging behind jurisdictions such as the European Union where steps have been taken to recognise that mobile wallets are part of the payments system.

According to the Reserve Bank of Australia, 500 million payments totalling over $20 billion are made with mobile wallets each month by Australians. The requested legislation will give the Reserve Bank of Australia powers to regulate all players within the payments system including global tech companies and ensure they are subject to the same oversight and consumer protection laws as the rest of the payments system.

United Kingdom: FCA letter on growth strategy

On 16 January 2025, the FCA published a letter written by Chief Executive, Nikhil Rathi, setting out ‘a new approach to ensure regulators and regulations support growth’ in response to a letter from the Prime Minister calling for regulators to come up with ideas to boost growth in the UK.

The FCA’s letter highlights that growth will be the cornerstone of the FCA’s strategy through to 2030, and also sets out work already planned for 2025 together with longer-term proposals.

Among other things, the letter addresses relevant payments and digital asset initiatives such as:

  • plans to progress the digital securities sandbox;
  • the suggestion of using powers anticipated under the Data (Use and Access) Bill to develop open finance. Notably, the FCA highlights that Government action in the area of digital identity authentication/verification can be a means to “unlock huge gains”;
  • the suggestion of removing the £100 contactless payment limit.

Global: FATF publishes second consultation document on payment transparency

On 24 February 2025, the Financial Action Task Force (FATF) published a second consultation document on revisions to Recommendation 16 (R 16), its interpretive note (INR 16) and the related Glossary of specific terms.

The revisions are aimed at adapting these FATF standards to changes in payment business models and messaging standards, and to evolving risks and vulnerabilities.

The second consultation document includes updated proposals which take into account stakeholder feedback to the FATF's first consultation on revisions to R 16 and INR 16, published in February 2024. The consultation document also summarises concerns raised by respondents relating to speed and cost of payments, financial inclusion, data protection and privacy.

The consultation closes on 18 April 2025 and the FATF expects to finalise the revisions in June 2025, after which it will develop guidance on payment transparency to facilitate consistent implementation of the updated standards. It anticipates that most or all of the new requirements will be in effect by the end of 2030.

Global: Wolfsberg Group publishes guidance to supplement payment transparency standards

On 21 February 2025, the Wolfsberg Group published a document providing guidance to supplement its payment transparency standards. The latest version of the payment transparency standards was published in October 2023.

United Kingdom: FCA shares key findings from review of payment services and account providers’ use of National Fraud Database and money mule account detection tool

On 23 January 2025, the FCA published its key findings from its review of payment services and account providers’ use of the National Fraud Database (NFD) and a money mule account detection tool to tackle risks associated with money muling activities. Key points include:

  • Money mules have been highlighted as an area for focus in the Government's Economic Crime Plan 2 (2023-2026), and 2023 Fraud Strategy. Using the NFD effectively, together with detection tools designed to trace the proceeds of fraud across payment networks, is critical in tackling mule activity.
  • The FCA reviewed cases from 13 firms where accounts suspected of being money mule accounts were identified, and the effectiveness of a money mule account detection tool. Areas for improvement are that firms should:
  • Conduct real-time checks of the NFD when onboarding customers, and periodic checks;
  • Submit information to the NFD as it works on a reciprocal basis;
  • Reply promptly to requests from other firms investigating potential money mule activities;
  • Consider customers' vulnerabilities when documenting investigations into money mule activities; and
  • Review and refine their thresholds for investigating alerts from fraud detection tools.

United Kingdom: PSR and BoE update CHAPS co-operation principles

On 27 January 2025, the Payment Systems Regulator (PSR) published correspondence exchanged with the Bank of England (BoE) relating to updating the principles concerning the areas for ongoing co-operation and co-ordination with respect to the operation of the CHAPS system.

The PSR sent a letter (dated 15 January 2025) to the BoE, which included a set of principles that were updated in 2024 following the introduction of the CHAPS reimbursement requirement for authorised push payment (APP) fraud.

In the letter, among other things, the PSR explains how it and the BoE, as the payment system operator of the CHAPS system, will share information and notify each other of proposed or potential changes to documents issued by the respective parties with regard to the CHAPS reimbursement requirement, by adding to the existing arrangements.

The PSR also sets out the key steps required to ensure co-operation and co-ordination in relation to the CHAPS reimbursement requirement. These concern the following:

  • Sharing information, including compliance data that the BoE receives from CHAPS participants in respect of CHAPS APP scam claims;
  • The BoE notifying the PSR of proposed or potential changes to the CHAPS reimbursement rules containing the CHAPS APP scams reimbursement policy;
  • The PSR notifying the BoE of any proposed or potential changes to specific direction 21, or any other potential regulatory change (such as those for the reimbursement arrangements for Faster Payments), that may impact the operation of the CHAPS reimbursement rules or the CHAPS reimbursement policy and its objectives.

In the BoE's response (dated 22 January 2025), it agrees with the updated principles and notes its support for the three key steps outlined by the PSR.

United Kingdom: PSR publishes new compliance monitoring framework

On 4 February 2025, the Payment Systems Regulator (PSR) published a policy statement containing its new Compliance Monitoring Framework (PS25/2) which sets out how its Compliance Monitoring team's work is structured.

The Framework covers:

  • The scope of the PSR’s monitoring work, which focuses on firms that are subject to directions (directed parties) to identify potential compliance issues and address them directly;
  • Its approach to compliance monitoring, including the monitoring principles that inform its work. These require it to take a proportionate and risk-based approach, act quickly when it identifies a compliance failure and ensure clear and reciprocal engagement with firms;
  • How it will monitor the parties that the PSR regulates in practice. It aims to ensure that firms are complying with the requirements it oversees through three stages: identification and assessment, action, and escalation of cases to the Enforcement team for further investigation and potential enforcement action;
  • How it communicates and engages with firms, including through its annual plan, and how it co-ordinates with other regulatory bodies.

In an accompanying thought piece, the PSR announces that it is planning to make changes to its Process and Procedures Guide later in 2025. It will also be publishing a similar document to the Monitoring Framework relating to its enforcement work.

United Kingdom: PSR publishes statement of policy on cost benefit analysis framework

On 31 January 2025, the Payment Systems Regulator (PSR) published a statement of policy (SoP) on its cost benefit analysis (CBA) framework (PS25/1). This follows a September 2024 consultation on the SoP. The PSR is required by section 104H of the Financial Services (Banking Reform) Act 2013 (FSBRA), which was inserted by the Financial Services and Markets Act 2023 (FSMA 2023), to develop and maintain an SoP on its CBA framework.

In PS25/1, the PSR explains its approach to CBA and how the CBA framework helps it to develop policies with a positive impact. The PSR has made some amendments to the draft version of the SoP to reflect certain comments from the respondents to the consultation.

Global: BIS launches project to explore improving instant cross-border payments using central bank money settlement

On 13 February 2025, the Bank for International Settlements (BIS) launched Project Rialto to explore how instant cross-border payments could be improved using a modular foreign exchange (FX) component combined with settlement in tokenised wholesale central bank money.

Project Rialto is a collaboration of the BIS Innovation Hub, Eurosystem and Singapore Centres in partnership with the Bank of France, the Bank of Italy, Bank Negara Malaysia (Central Bank of Malaysia) and the Monetary Authority of Singapore.

Australia: BNPL providers must apply for a credit licence

On 17 January 2025, the Australian Securities and Investments Commission (ASIC) published a press release announcing that buy-now, pay-later (BNPL) product providers must now apply for a credit licence after the National Credit Code was extended to BNPL contracts by the Treasury Laws Amendments (Responsible Buy Now Pay Later and Other Measures) Act 2024 (the BNPL Act) following royal assent on 10 December 2024.

From 10 June 2025, providers of BNPL contracts will need to hold a credit licence that authorises them to engage in credit activities as a credit provider. This is subject to transitional arrangements which allow a provider to continue to provide BNPL contracts where they have applied and had their application accepted for the appropriate Australian credit licence or variation of their existing credit licence.

Licensing steps for BNPL providers are as follows:

  • Those who do not have a credit licence must apply for a credit licence, have ASIC accept the application and become a member of the Australian Financial Complaints Authority (AFCA).
  • Those who have a credit licence that authorises them to engage in credit activities in relation to credit contracts will not need to change anything. This authorisation now also applies to BNPL contracts.
  • Those who have a credit licence but the licence does not authorise them to engage in credit activities as a credit provider will need to apply for a variation.

ASIC states that it is important for providers to act early to apply for or vary a credit licence due to the time it takes to complete and process applications. To minimise the risk that the application is not accepted before 10 June 2025, ASIC encourages providers to lodge their applications by 11 May 2025.

Chapter 3

Regulatory Developments: Digital Assets

Papua New Guinea: CBDC Proof of Concept study results announced

On 28 January 2025, the Bank of Papua New Guinea announced the results of its Proof of Concept study on central bank digital currencies (CBDCs), a first step towards a CBDC in the country.

The study involved the central bank and Japanese companies Soramitsu and Mitsubishi, as well as funding and input from the Japanese government. It examined how a CBDC could be integrated into the Papua New Guinea payment system. The study stems from the rapid advancement in CBDCs globally which aim to improve payment systems and financial inclusion. The results note that a CBDC could reduce reliance on physical currency, reduce cash-handling and distribution costs, and improve transaction efficiency.

In terms of next steps, the central bank is mindful of challenges such as legal and regulatory gaps that currently exist, the need for robust digital infrastructure to support the CBDC and the need for a well-defined policy framework to support innovation. A roadmap will be needed to balance technological, legal, regulatory and infrastructure considerations. Further studies will be needed to engage more stakeholders and explore cross-border payments.

United States: President Trump signs Executive Order on digital assets and Congress presents drafts of legislation regulating stablecoins

On 23 January 2025, President Donald Trump signed an Executive Order on digital assets.

The Executive Order sets out the policy of the Administration to support the digital asset industry, including by:

  • promoting use of public blockchain network;
  • promoting the sovereignty of the United States dollar, including through actions to promote the development of dollar-backed stablecoins worldwide;
  • protecting and promoting fair and open access to banking; and
  • providing regulatory clarity and certainty on technology-neutral regulations.

It also establishes a Presidential Working Group on Digital Asset Markets, which is tasked with submitting a report to the President (within 180 days) recommending regulatory and legislative proposals, including: (i) proposing a regulatory framework for the issuance and operation of digital assets, including stablecoins; and (ii) evaluating the potential creation and maintenance of a national digital asset stockpile and proposing criteria for establishing such a stockpile (e.g. from cryptocurrencies seized by law enforcement).

In addition, the Executive Order prohibits the issuance, circulation or use of central bank digital currencies (CBDCs) and terminates any plans or initiatives to create a CBDC in the United States. Also of note is that recently both chambers of Congress presented drafts of legislation for regulating stablecoins in the U.S.:

  • On 4 February 2025: the GENIUS Act, presented by Sens. Tim Scott, Bill Hagerty, Cynthia Lummis and Kirsten Gillibrand. A one-page overview of the legislation can be found here.
  • On 6 February 2025: the STABLE Act, introduced by House Financial Services Committee Chairman French Hill and Digital Assets, Financial Technology, and Artificial Intelligence Subcommittee Chairman Bryan Steil.

El Salvador: Government increases cryptocurrency reserves while passing legislation to comply with IMF deal to scale back Bitcoin activities

On 29 January 2025, El Salvador’s Congress passed a bill to amend its Bitcoin law in order to comply with a $1.4 billion financing agreement that it entered into with the International Monetary Fund (IMF) in December 2024, in which it was agreed that the government would step back from some of its Bitcoin activities (see the January 2025 edition of this Newsletter). Under the terms of the new law, Bitcoin is no longer “currency” so acceptance of Bitcoin is voluntary for private sector businesses. The state will also no longer accept Bitcoin as a form of payment for taxes and debts and is scaling back investment in the “Chivo Wallet,” the state-backed crypto-wallet.

Recent activities show El Salvador’s strategy to continue to buy Bitcoin despite scale-back of other Bitcoin activities. On 5 February 2025, it was reported that El Salvador had added 12 Bitcoin to its stock amid a dip in the crypto markets. In total, in the past 30 days starting from 5 February, it had added 60 Bitcoin to its reserves. It brings the Central American country’s holdings to a total of 6,068 BTC, valued at over $554 million.

Czech Republic: Central Bank approves proposal to explore Bitcoin reserves

On 30 January 2025, the Czech National Bank (CNB) published a press release confirming that they will analyse the options of holding alternative asset classes, such as cryptocurrency, in their reserves in line with CNB Governor Aleš Michl’s proposal to hold reserves in Bitcoin.

If the Board approves the results of the analysis and moves forward with Michl’s proposal, the CNB could hold as much as 5% of its foreign exchange reserves in alternative asset classes, such as Bitcoin, equating to €140bn. The central bank’s €140bn in foreign exchange reserves are equivalent to about 45% of the Czech Republic’s GDP.

Michl, speaking to the Financial Times in an article published on 29 January, stated that he likes the chance of profitability and has “a totally different philosophy” about Bitcoin to his counterparts. While acknowledging the “extreme volatility” and limited record of Bitcoin, Michl highlighted wider investor interest in Bitcoin, Donald Trump’s pledges on deregulation and the growing influence of cryptocurrency executives in Trump’s administration, and the fact that a large investment by a central bank in Bitcoin could itself impact the coin’s price.

Central banks usually hold conservative assets such as U.S. Treasuries and other forms of highly rated bonds in reserve. The CNB already stands out from other central banks, given it holds 22% of its portfolio in equities. Almost no other central banks have publicly ventured into crypto, and if the CNB do take this step, the Czech Republic would become the first western central bank to do so.

European Union: Summary of recent MiCA developments

The following Markets in Crypto-Assets Regulation (MiCA) related documents have been published recently:

  • On 17 January 2025, ESMA published a statement on the provision of certain cryptoasset services in relation to asset-referenced tokens (ARTs) and electronic money tokens (EMTs) that are non-compliant under MiCA. Alongside the statement, the European Commission has published a Q&A providing guidance on the obligations contained in Titles III and IV of MiCA and how these obligations should apply to cryptoasset service providers (CASPs). It clarifies that certain cryptoasset services may constitute an offer to the public or an admission to trading in the EU and should therefore comply with Titles III and IV of MiCA.
  • On 24 January 2025, ESMA published an opinion on draft regulatory technical standards (RTS) specifying certain requirements relating to conflicts of interest for CASPs under Article 72 of MiCA.
  • On 31 January 2025, ESMA published a supervisory briefing providing guidance on the expectations on applicant CASPs and national competent authorities (NCAs) when they are processing authorisation requests under MiCA. NCAs are expected to apply the principles in the briefing as part of their authorisation procedures, as well as ensuring continued adherence for CASPs once they are authorised.
  • On 5 February 2025, the EBA published an opinion (dated 24 January 2025) on the European Commission's proposed amendments to its draft RTS on conflicts of interest for issuers of ARTs under Article 32(5) of MiCA.
  • On 13 February 2025, the following Delegated Regulations supplementing MiCA were published in the Official Journal of the EU and will enter into force on 5 March 2025:
  • On 17 February 2025, ESMA published a consultation paper on guidelines for the criteria to assess knowledge and competence under MiCA. The deadline for responses is 22 April 2025. ESMA intends to publish a final report and guidelines in Q3 2025.
  • On 20 February 2025, the following Delegated and Implementing Regulations supplementing MiCA were published in the Official Journal of the EU and will enter into force on 12 March 2025:
    • Commission Delegated Regulation (EU) 2025/303 supplementing MiCA with regard to RTS specifying the information to be included by certain financial entities in the notification of their intention to provide cryptoasset services.
    • Commission Implementing Regulation (EU) 2025/304 supplementing MiCA by laying down implementing technical standards (ITS) with regard to standard forms, templates and procedures for the notification by certain financial entities of their intention to provide cryptoasset services.
  • On 26 February 2025, ESMA published the official translations of its guidelines on the procedures and policies in the context of transfer services for cryptoassets. The guidelines apply from 27 April 2025. NCAs must notify ESMA by 26 April 2025 whether they comply, do not comply but intend to comply or do not intend to comply with the guidelines. CASPs are not required to report whether they comply with the guidelines.
  • On 26 February 2025, ESMA published the official translations of its guidelines on situations in which a third-country firm is deemed to solicit clients established or situated in the EU and the supervision practices to detect and prevent circumvention of the reverse solicitation exemption. The guidelines apply from 27 April 2025. NCAs must notify ESMA by 26 April 2025 whether they comply, do not comply but intend to comply or do not intend to comply with the guidelines.

European Union: EBA and ESMA joint report on crypto-asset developments

On 16 January 2025, the EBA and ESMA published a Joint Report on the recent developments in crypto-assets. Article 142 of the Markets in Crypto-Assets Regulation (MiCA) mandates the European Commission, after consulting the EBA and ESMA, to submit a report to the European Parliament and Council of the EU on recent developments in crypto-assets. This publication is the EBA and ESMA’s contribution to the European Commission’s report to the European Parliament and Council.

The joint report covers:

  • Decentralised finance (DeFi): the report finds that DeFi remains a niche phenomenon. EU adoption of DeFi, while above the global average, is lower than other developed economies such as the United States and South Korea. The report also discusses, among other things, AML/CTF risks of DeFi, and implications of maximal extractable value (MEV) on DeFi markets; and
  • Crypto lending, borrowing and staking: the report contains an analysis of the main types and typical features of the business models observed in the market, as well as associated risks. The report also finds that there appears to be limited engagement of EU consumers and financial institutions with these services.

Following the joint report, ESMA and the EBA also published factsheets on DeFi and on Crypto lending, borrowing and staking.

Luxembourg: Law implementing MiCA enters into force

On 17 February 2025, the CSSF (Commission de Surveillance du Secteur Financier) announced that the law of 6 February 2025 regarding digital finance (Law) had been published in the Official Journal of Luxembourg on 10 February 2025 and had entered into force on the same day.

The Law sets out rules relating to the national implementation of the Markets in Crypto-Assets Regulation (MiCA) and officially designates the CSSF as the competent authority under MiCA.

The Law also provides details on the transitional measures targeting virtual asset service providers (VASPs). VASPs registered with the CSSF before 30 December 2024 in accordance with Article 7-1 of the amended Law of 12 November 2004 on the fight against money laundering and the financing of terrorism as in force as of 30 December 2024, shall remain registered in the VASP register established by the CSSF until 1 July 2026 or until they are granted or refused authorisation under Article 63 of MiCA, whichever is sooner.

Italy: Bank of Italy issues public consultation proposing to extend controls on CASPs

On 15 January 2025, the Bank of Italy issued a public consultation proposing to extend the Regulation on customer due diligence and the Regulation on organisation, procedures and internal controls to crypto-asset service providers (CASPs).

Regulation (EU) 2023/1113 on information accompanying transfers of funds and certain crypto-assets (TFR) included CASPs among financial institutions obliged to comply with anti-money laundering (AML) obligations, in order to subject them to the more intensive AML controls provided for this category of entities. This differs from the previous legal framework, where virtual asset service providers (VASPs) were subject to less intense requirements and level of supervision, and is coupled with the adoption of Regulation (EU) 2023/1114 on markets in crypto-assets (MiCA) which sets a harmonized regulatory framework for CASPs.

The Italian implementation of the TFR amended the Legislative Decree 231/2007 (Italian AML Decree), assigning the role of AML supervisory authority for CASPs to the Bank of Italy.

The Bank of Italy has now issued a public consultation proposing to extend to this new category of market players both the Regulation on customer due diligence and the Regulation on organization, procedures and internal controls, which would entail CASPs being subject to rules already applicable to banks and other financial intermediaries, including but not limited to self-risk assessment exercises, reporting obligations to the Bank of Italy, the adoption of detailed policies and procedures, and the appointment of a senior manager responsible for AML.

We have published an article on this development.

Global: Wolfsberg Group publishes FAQs on defining digital assets for AML and CTF purposes

On 21 February 2025, the Wolfsberg Group published FAQs to help financial institutions assess the risks generated by the emergence of digital assets for anti-money laundering (AML) and counter-terrorist financing (CTF) purposes. The group intends to provide periodic updates through FAQs, guidance, case studies and deep dives to support the continued risk profiling and treatment as the use of digital assets continues to evolve.

United Kingdom: Crypto-asset staking exempted from meaning of ‘collective investment schemes’ under FSMA 2000

On 31 January 2025, the widely anticipated statutory instrument exempting crypto-asset staking from the meaning of “collective investment schemes” (CIS) as defined under the Financial Services and Markets Act 2000 (FSMA 2000) came into force.

In the UK, although crypto-asset staking is not expressly regulated under financial services legislation, under the previous rules certain staking arrangements (depending on the exact operating model) had the potential to meet the definition of CIS and therefore fall within the applicable regulatory perimeter. This has caused concerns in the industry regarding the ability to offer staking services without being in breach of existing regulatory requirements that were not developed with such new business models in mind.

To address these concerns, the Financial Services and Markets Act 2000 (Collective Investment Schemes) (Amendment) Order 2025inserts a new paragraph 22 into the Schedule to the Financial Services and Markets Act 2000 (Collective Investment Schemes) Order 2001, which states that “arrangements for qualifying crypto-asset staking” are excluded from the meaning of CIS as defined under FSMA 2000.

For more on this development, see our article.

United Kingdom: Financial Services and Markets Act 2023 (Digital Securities Sandbox) (Amendment) Regulations 2025 published

On 30 January 2025, the Financial Services and Markets Act 2023 (Digital Securities Sandbox) (Amendment) Regulations 2025 (SI 2025/93) were published on legislation.gov.uk, together with an explanatory memorandum.

The Regulations amend the Financial Services and Markets Act 2023 (Digital Securities Sandbox) Regulations 2023 (SI 2023/1398) (the DSS Regulations). They modify the effect of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (SI 2017/692) (MLRs 2017) by temporarily disapplying provisions of the MLRs 2017 that apply to cryptoassets (and other related terms defined in regulation 14A of the MLRs 2017) in relation to activities in scope of the Digital Securities Sandbox (DSS).

The Regulations also make other minor amendments to the DSS Regulations.

The DSS Regulations create the framework that will enable the Bank of England (BoE) and the FCA to operate the DSS, which allows firms and regulators to test the use of developing technology (such as distributed ledger technology (DLT) or technology that facilitates digital assets). The activities that are within scope of the DSS are certain activities relating to a central securities depository (CSD) (specifically, notary, settlement and maintenance) and the operation of a trading venue (specifically, a multilateral trading facility (MTF), an organised trading facility (OTF) or a recognised investment exchange (RIE)).

The Regulations come into force on 3 March 2025. They were not consulted on as the changes are based on stakeholder feedback received from other consultations.

Japan: FSA considering significant regulatory changes for cryptocurrency

On 10 February 2025, it was reported that Japan’s Financial Services Agency (FSA) is considering significant regulatory changes for the crypto-asset sector. Reportedly the FSA is considering classifying crypto-assets as financial products similar to securities in a move to enhance investor protection by requiring businesses to disclose more information. Other proposed changes include a reduction in the tax rate on crypto earnings from 55% to 20% and the potential approval of Bitcoin spot ETFs which is expected to enhance Japan’s competitiveness in the global digital asset market.

The FSA is apparently conducting a closed study session with experts to analyse current regulations. The reforms are expected to be formally announced by June 2025, with legislative changes expected to become effective in 2026.

South Korea: Financial Services Commission announces roadmap on corporate participation in virtual asset market

On 13 February 2025, the Financial Services Commission (FSC) announced a roadmap for allowing corporate participation in the virtual asset market. This will lift the ban introduced in 2017 on corporate entities transacting in virtual assets. This development follows on from the implementation of the Virtual Asset User Protection Act of 19 July 2024.

South Korea: Crypto crime task force to be upgraded into full investigation unit

On 28 January 2025, it was reported that South Korea’s crypto crime task force unit is being upgraded to become a permanent unit at the Seoul Prosecutor’s Office. The task force - known as the Joint Investigation Unit (JIU) for Virtual Asset Crimes - was initially launched as a temporary unit in mid-2023.

Canada: Office of Superintendent of Financial Institutions issues guidance on capital and liquidity treatment of crypto-assets

On 20 February 2025, the Office of the Superintendent of Financial Institutions issued the following guidance on capital and liquidity treatment of crypto-assets for banking and insurance:

There is an advisory note for both Guidelines stating that the Interim Arrangement for the Regulatory Capital and Liquidity Treatment of Cryptoasset Exposures remains the effective crypto-asset guidance until the end of fiscal Q4 2025.

Hong Kong: SFC outlines virtual assets strategy

On 21 February 2025, the Securities and Futures Commission (SFC) outlined a 12-point strategy to boost Hong Kong’s virtual asset market.

The ‘ASPIRe’ roadmap for a resilient virtual asset ecosystem comprises five pillars:

  • Pillar A (Access) – Streamlining market entry through regulatory clarity;
  • Pillar S (Safeguards): Optimising compliance burdens without compromising security;
  • Pillar P (Products) – Expanding product offerings and services based on investor categorisation;
  • Pillar I (Infrastructure) – Modernising reporting, surveillance and cross-agency collaboration; and
  • Pillar Re (Relationships) – Empowering investors and industry through education, engagement and transparency.

The SFC notes that the rapid maturation of virtual assets demands forward-looking regulation that anticipates systemic risks to future-proof the ecosystem. The roadmap, therefore, aims to streamline global liquidity, strengthen security compliance and product frameworks, and modernise financial infrastructure to leverage blockchain efficiency.

European Union: ECB announces expansion of initiative to settle DLT-based transactions in central bank money

On 20 February 2025, the European Central Bank (ECB) announced in a press release that the Eurosystem intends to expand its initiative to settle transactions recorded on distributed ledger technology (DLT) in central bank money.

There will be a two-track approach. Firstly, the Eurosystem will develop and implement a safe platform for settlements in central bank money via an interoperability link with the existing TARGET Services. Secondly, the Eurosystem will look at an integrated, long-term solution for settling DLT-based transactions in central bank money that will also include international operations such as foreign exchange settlement.

This builds on the Eurosystem’s exploratory work and trials on new technologies for wholesale central bank money settlement conducted between May and November 2024.

The initiative will contribute to establishing an integrated European market for digital assets, in line with the ECB Governing Council’s call for promoting a digital capital markets union in its statement of 7 March 2024.

Global: FSB publishes consultation and terms of reference for thematic peer review on global regulatory framework for cryptoassets

On 21 February 2025, the Financial Stability Board (FSB) published summary terms of reference for its thematic peer review on its global regulatory framework for cryptoasset activities. The framework consists of two sets of high-level recommendations for the regulation, supervision and oversight of both cryptoasset activities and markets and global stablecoin arrangements.

An accompanying press release explains that the FSB is seeking feedback from stakeholders as part of its thematic peer review of implementation of the global regulatory framework by FSB member and certain non-member jurisdictions. The summary terms of reference provide more detail on the objectives, scope and process of the review.

The FSB has sent a questionnaire to relevant jurisdictions and also invites feedback from stakeholders on a number of issues set out in the press release.

Feedback is requested by 28 March 2025. The FSB expects to publish the peer review report in October 2025.

United States: IRS regulatory reporting requirements on “DeFi brokers” could be repealed

In December 2024, the Internal Revenue Service (IRS) released regulatory reporting requirements on trading front-end service providers interacting directly with customers on digital asset transactions (so-called “DeFi brokers).

In light of the new administration, the rule containing the requirements may be repealed following a resolution by Senator Ted Cruz, a move that is supported by key industry players according to a letter (dated 19 February 2025) from the Blockchain Association to Members of Congress.

Chapter 4

Market Developments

South Sudan: Bank of South Sudan launches National Instant Payment System

On 3 February 2025, the Bank of South Sudan launched the country’s first National Instant Payment System (NIPS) in collaboration with AfricaNenda Foundation. NIPS is designed to enable real-time, secure, and cost-effective transactions, promoting interoperability between banks, mobile money providers, and other financial institutions.

The project marks a milestone in the modernisation of South Sudan’s financial and payment infrastructure. The initiative aligns with broader efforts to integrate.

United States: BNY send largest instant payment in United States history

On 10 February 2025, it was announced that the Bank of New York Mellon Corporation (BNY), using The Clearing House’s RTP Network, had sent the largest instant payment in United States history. The transaction was a $10 million inter-company liquidity management payment to Bank of America on behalf of a client. The record-breaking payment was made possible after The Clearing House increased the RTP network’s transaction limit from $1 million to $10 million, effective 9 February 2025.

Sweden: Riksbank calls for more action on TIPS cross-currency project

On 17 January 2025, Sweden’s central bank, Riksbank, published a press release encouraging other Swedish banks to participate in the Target Instant Payment Settlement (TIPS) system. Participation in the initiative would involve joining discussions on the design and testing of the TIPS cross-currency service. For some time, the ECB, the Riksbank and Denmark’s central bank, Danmarks Nationalbank, have been working together on the initiative to make instant payments possible between euros, Swedish krona and Danish krone. These central banks provide the underlying infrastructure to facilitate TIPS, but banks and businesses must develop services to enable payments to be made cross-currency.

Banks can express their interest in participating until 28 February 2025 by signing a Letter of Intent, a template for which is linked to the press release.

Canada: Progress on Real-Time Rail

On 29 January 2025, Jude Pinto, Chief Delivery Officer at Payments Canada, provided an update on the Real-Time Rail (RTR). The RTR is a multi-year, multi-system payments modernisation initiative which will allow Canadians to initiate instant payments 24/7/365. The system will use the ISO 20022 messaging standard to support payment information accompanying every payment.

Pinto stated that Payments Canada has made “substantial progress” alongside its partners IBM Canada, CGI and Interac. The new team is more than halfway through the technical build, which encompasses the installation of hardware in data centres and the development of software. The build will continue over the next quarter. Pinto added that progress has been made on an integrated fraud solution, with consensus reached with members and participants on a fraud strategy and high-level requirements for a fraud mitigation system.

Global: PayPal partners with Verifone to push in-person payments

On 26 February 2025, it was reported that PayPal is partnering with Verifone to boost its in-person payments presence. The partnership will combine Verifone’s hardware with PayPal’s enterprise payment processing and e-commerce capabilities, to provide enterprise merchants with an omnichannel solution. This solution will be part of PayPal Open, which allows merchants of all sizes to access the entire PayPal ecosystem. The partnership will launch in the U.S. soon, followed by the UK and Germany later this year.

United Kingdom: Government invites bidders to bring open banking to Gov.UK Pay

On 21 February 2025, it was reported that the UK government is inviting bidders for a £49 million contract to implement open banking technology into its Gov.UK Pay payment platform. The UK government is seeking a payment services provider to process credit and debit card payments and open banking payments. The chosen provider will have a 12-month onboarding period, before commencing service delivery in 2026.

Jordan: Fintech Galaxy approved to test Open Banking

On 29 January 2025, it was reported that Fintech Galaxy has received approval from the Central Bank of Jordan to participate in the JoRegBox regulatory sandbox. The approval, which is the first of its kind for an Open Banking company in Jordan, allows the company to test and deploy Open Banking in a controlled real-market environment.

Global: Kraken launches crypto payment service

On 31 January 2025, it was reported that crypto exchange Kraken had launched its payment service, Kraken Pay, allowing users to send 300 different fiat and digital currencies to family and friends across the world. The service will also convert assets, for example from Bitcoin to Swiss francs. Both payee and payer will require Kraken Pay accounts. Accounts will be assigned a @Kraktag unique identifier that senders enter instead of needing to enter bank account details. Funds are sent using a paylink URL.

United States: Trump Media launches fintech brand

On 29 January 2025, it was reported that Donald Trump’s media brand, Trump Media and Technology Group (TMTG) has launched a financial services and fintech brand, Truth.FI, to push into crypto and customised exchange-traded funds.

TMTG, which already has a social media platform and streaming service, had a rise in share price by more than 10% in early trading after the announcement.

TMTG says that the fintech brand will have up to $250 million kept in custody by Charles Schwab and allocated to separately managed accounts, customised ETFS, bitcoin and similar crypto-assets.

Brazil: Bybit Pay launches to enable crypto and fiat payments

On 27 January 2025, Bybit announced that Bybit Pay is now live in Brazil. Bybit Pay is a blockchain-powered payment solution enabling cryptocurrency and fiat currency payments, that integrates with the Brazilian Pix instant payment system developed by the Central Bank of Brazil.

Bybit Pay allows users to connect their crypto wallets for transactions across websites, mobile applications and point-of-sale systems, offering an interface for deposits, withdrawals and payments. The platform supports various cryptocurrencies such as bitcoin, ethereum, tether (USDT) and USD coin. It is available to users in Brazil via the Bybit app and website.

The press release states that this platform will also benefit merchants by enabling them to accept payments from Bybit’s global user base of over 60 million individuals. This will expand their customer reach while offering an integrated fiat-crypto payment experience.

Argentina: Coinbase approved to launch

On 28 January 2025, it was reported that Coinbase, the U.S. based cryptocurrency exchange, was given approval by Argentinian regulators to debut in the country. Coinbase has secured a Virtual Asset Service Provider (VASP) registration from the National Securities Commission (CNV) which will allow Coinbase to operate within the country’s legal framework for virtual assets.

According to Coinbase, 5 million Argentinians use crypto daily, 87% believe that crypto can boost financial independence, and 76% see crypto as a solution to some of their financial frustrations, such as inflation and high transaction costs.

Coinbase will offer localised services in Spanish, including local payment methods and customer support. It also plans to launch educational initiatives to enhance financial literacy for its users.

Global: Klarna to embrace crypto

On 8 February 2025, Klarna stated in a post on X, stated that the buy-now pay-later firm will embrace crypto. It has been reported that following the post, Klarna has been inundated with suggestions, with many urging a compliance-first approach and others suggesting Klarna add Bitcoin as a payment option, enabling merchants to accept payments of crypto through the Klarna platform.

Nigeria: Coinbase partners with Onboard Global to offer crypto P2P payments

On 26 February 2025, it was reported that Coinbase is partnering with Onboard Global to enable Nigerian users to buy and sell cryptocurrencies efficiently. The partnership will allow Coinbase Wallet customers to buy crypto using local currency from a network of seller merchants without the need for ID verification if the purchase is under USD 100. Coinbase did not previously offer crypto buying and selling in Nigeria as governing bodies prohibit transactions with certain high-risk regions. The partnership will allow for this risk to be handled by Onboard, which will provide verification and a secure P2P expense platform for trades to take place.

Global: Cryptorefills launches two new apps within the World App

On 13 February 2025, it was reported that Cryptorefills, a blockchain gift card and commerce platform, has launched two new apps, namely Cryptorefills Flights and Cryptorefills Hotels. These apps aim to support over 23 million World App users in booking flights and hotels using Worldcoin (WLD) and USDC.e. This will allow World App customers to benefit from a crypto-enabled experience that meets their needs, demands and preferences.

Asia-Pacific: MasterCard launches anti-money laundering service “TRACE”

On 13 February 2025, it was reported that Mastercard had launched its TRACE (Trace Financial Crime) service in Asia Pacific. TRACE incorporates critical data points across an entire domestic network to identify money mules involved in financial crime. This will give financial institutions a network-level perspective they wouldn’t otherwise have. Mastercard’s first Asia Pacific rollout of TRACE was in the Philippines in collaboration with the local interbank network BancNet. The only other market in the world to have implemented TRACE is the United Kingdom.

India: Introduction of exclusive domains for banks

On 10 February 2025, it was reported that the Reserve Bank of India has announced that it intends to introduce new domains for banks in order to reduce cyber security threats, malicious activities such as phishing, and enhance trust in digital banking and payments. The country’s banks will use “.bank.in” from April this year. This will be followed by non-bank financial firms using “.fin.in”. The Institute for Development and Research in Banking Technology will be the exclusive registrar for the new domains.

India: Paytm collaboration with Indian government to promote fintech

On 25 February 2025, it was reported that Paytm has signed a Memorandum of Understanding with the Indian government’s Department for Promotion of Industry and Internal Trade (DPIIT). The partnership will aim to give startups regulatory and compliance assistance via workshops featuring industry and government bodies. Paytm will also provide mentorship, infrastructure support, market access and funding opportunities to startups. DPIIT views the partnership as a crucial step in strengthening India’s startup ecosystem.

Chapter 5

Surveys and Reports

Global: PYMNTS report on digital wallets for cross-border payments

In January 2025, PYMNTS Intelligence in collaboration with TerraPay published a report ‘Global Money Movement: How Digital Wallets are Transforming Cross-Border Payments relating to the role of digital wallets in cross-border payments. The report involves research from four markets around the world – Saudia Arabia, Singapore, the United Kingdom and the United States.

Key insights include that:

  • In 2023, global remittances accounted for $794 billion in cross-border flows, with cross-border payments growing by billions of dollars each year. However, the prioritisation of domestic digital wallets has resulted in a fragmented network of wallets and accounts that cannot easily transact across borders.
  • Digital wallets are a viable option for creating cross-border interoperability as 42% of consumers already prefer to send and receive cross-border payments via digital wallet. No other payment method earned as much preference. Despite digital wallets’ popularity for the use case, only 49% of banks enable individual consumers to send and receive cross-border payments via digital wallets.
  • Many consumers not currently uasing digital wallets for cross-border payments expect to adopt them for a wide range of use cases going forward. Among U.S. consumers, 55% plan to adopt digital wallets to send or receive cross-border payments.
  • Interoperability is a key barrier to digital wallet adoption. Currently, senders and receivers must coordinate the use of the same digital wallet, and there are limitations on which wallets can send to which countries. Digital wallet options that allow consumers to navigate differing country-to-country regulations can be key to enabling more seamless cross-border payments.

Ireland: Central Bank data on payment fraud

On 24 January 2025, the Central Bank of Ireland published new Irish payment fraud data. The data tracks payment fraud across 2022 and 2023 in Ireland across various payment methods including credit transfers, card payments, e-money and direct debits.

Findings reveal that although fraud is growing in Ireland, rates remain below EU averages across most payment methods, with the exception of card payments. The data shows that the total value of fraudulent payments rose by 26% in 2023, increasing to €126 million from €100 million in 2022.

Around 98% of card payment fraud value was accounted for by fraudsters initiating the payment order (i.e. stolen card, account or personal information for payment). Fraudsters use social engineering to convince payers to make payments. This type of fraud in credit transfers rose from 27% in early 2022 to 42% by the end of 2023.

Approximately 60% of the value of fraud is made through credit transfers, although these transactions only accounted for 4% of the total number of fraudulent transactions. This reflects the fact that credit transfers are often used for large-value payments compared with other payment methods in Ireland. Credit transfer fraud amounted to €70 million in 2023, with 24,000 transactions.

Approximately 60% of the total value of fraud across 2022-2023 involved cross-border payments, amounting to €77 million in 2023 and €64 million in 2022.

United States: Numerator’s Buy Now Pay Later Report

On 17 February 2025, Numerator published their report ‘Insights into Buy Now, Pay Later: Growth & Trends 2025’. Numerator surveyed 5,027 consumers and examined their purchase data to build a picture of BNPL usage, consumer concerns, and the possible implications of a larger BNPL market amid reduced government involvement.

Key insights include that:

  • Half of Americans have used some form of BNPL service, with 21% of respondents having used PayPal Pay in 4/Pay Monthly, 18% used Affirm and 16% used Klarna.
  • BNPL is usually used for general merchandise. However, Gen Z and Millennials are 50% more likely to use BNPL for experiences such as concerts and festivals.
  • BNPL users tend to be Gen Z or Millennial multi-cultural, urban families earning under $60,000 per year.
  • BNPL users are more likely to engage with higher-end department stores and premium brands such as Nike, and e-commerce storefronts such as Shein.
  • 25% of BNPL users are stressed about defaulting on their payments, and most Americans view BNPL as a cause of debt accumulation.

Authored by Charles Elliott, Virginia Montgomery, Erin Davies and Nurangis Sobirkhonova.

More on this topic

News

The Payments Newsletter including Digital Assets and Blockchain, January 2025

21 January 2025

 

Additional Resources

Key developments of interest over the last month include: the U.S. Consumer Financial Protection Bureau looking at digital payment privacy and consumer protections; the UK FCA publishing a discussion paper on admissions and disclosures and a market abuse regime for cryptoassets; the Reserve Bank of India announcing the implementation of a beneficiary name verification facility for RTGS and NEFT; and the Bank of England publishing a progress update and a design note on a blueprint framework for a retail CBDC (digital pound).

In this Newsletter:

  • Regulatory Developments: Payments
  • Regulatory Developments: Digital Assets
  • Market Developments
  • Surveys and Reports

For previous editions of the Payments Newsletters, please visit our Financial Services practice page.

Chapter 1

Regulatory Developments: Payments

United Kingdom: PSR publishes final report and consultation on cross-border interchange fees

On 13 December 2024, the Payment Systems Regulator (PSR) published its final market report on UK/EEA cross-border interchange fees and launched a consultation on remedies in connection to the report.

From January 2021, the EU Interchange Fee Regulation (IFR) ceased to apply to cross-border transactions between the UK and EEA countries. As such, Visa and Mastercard increased their consumer debit card fees from 0.2% to 1.15% and consumer credit card fees from 0.3% to 1.5% for card-not-present transactions. In response, the PSR launched a market review in October 2022 to understand the factors leading to the increase in the interchange fees, and judge how effectively the market as a whole is working.

In the final report, the PSR reiterates its interim position that there is insufficient competition in the card scheme market to drive down the fees set by Visa and Mastercard. The PSR estimates that the increased fees cost UK businesses £150 - 200 million in 2022 and 2023, with 95% of the increased cost of the interchange fee being passed through to merchants. The PSR takes the view that merchants and customers have seen no benefit from the increase, so this is harming market users and indicates a market operating in a suboptimal manner.

The PSR considers that the only effective remedy is a price cap. Whilst this would not solve the issue of the market operating poorly, it would protect service users. A two-stage approach is suggested, with an initial cap at the EU IFR level, and a second cap being introduced once further research has been conducted into the methodology and level of the cap. The consultation on the proposed remedy is open until 7 February 2025.

For more on this development, see our article.

United Kingdom: Bank of England speech provides updates on future roadmap for RTGS service

On 16 December 2024, the Bank of England (BoE) published a speech by Victoria Cleland, Executive Director for Banking, Payments and Innovation, providing an update on the future roadmap for the Real-Time Gross Settlement (RTGS) service.

The speech outlined the BoE's intention for the renewed RTGS system to increase resilience, foster innovation and promote competition. User functionality is central to this and will be improved through introducing APIs, facilitating direct access for a wider group of market participants, and having longer settlement hours. Cleland highlights the importance of central bank money due to its status as the lowest risk, most liquid and highest security asset in the UK economy. Cleland notes that the BoE wants "to ensure that there is not a significant shift away from settlement in central bank money".

The BoE is taking an iterative approach to payments innovation. The renewed RTGS system will be modular to allow elements to be updated independently of the whole system, facilitating smaller iterative changes. This means that, once the new core ledger and settlement engine is introduced in 2025, enhancements such as synchronised payments will be more smoothly introduced.

Close collaboration with industry is welcomed, and three instances from 2024 are highlighted:

  1. Reviewing whether wider access to RTGS could be facilitated – removing excess tiering and the need for intermediaries will facilitate cheaper and faster payments;
  2. Reviewing the case for extending RTGS settlement hours – feedback from the previous discussion paper has informed the BoE's intention to gradually extend settlement hours to "near-24x7 operation around the turn of the decade"; and
  3. Fostering wholesale settlement innovation through "synchronisation" - this will enable co-ordination between accounts within RTGS, enabling transfers of one type of asset to be settled in another.

United Kingdom: FCA statement on planned revision of MoU with BoE, PRA and PSR in light of National Payments Vision

On 20 December 2024, the FCA published a statement announcing that it, the Bank of England (BoE), the PRA, and the Payment Systems Regulator (PSR) have committed to revise their Memorandum of Understanding (MoU) - which sets out the high-level framework that they use to cooperate with one another in relation to payment systems in the UK - by Q2 2025 in line with the Government’s National Payments Vision (NPV).

For more on the NPV, take a look at our article here.

United Kingdom: PSR publishes Strategy update

On 16 January 2025, the Payment Systems Regulator (PSR) published its commitments for the next two years following a mid-term review of its five-year Strategy.

The PSR states that its review reflects extensive engagement with stakeholders, the trends it is seeing in payments – both at home and abroad, the Government’s growth mission, and the impact of the National Payments Vision (NPV). It has also published a related press release and a stakeholder engagement factsheet summarising stakeholders’s views and how it responded to feedback in updating its Strategy.

Having reflected on the above developments, the PSR will focus on the following three core commitments for the remainder of the Strategy term:

  • Complete the important work underway – protecting consumers and supporting competition: The PSR will continue to embed its APP fraud reimbursement requirements, including commissioning an independently led review, and deliver the outcomes from its card market reviews (see the separate item in this Newsletter on the PSR’s final report and consultation on cross-border interchange fees). It will work closely with the FCA to enable it to take forward work on the overall framework for commercial Open Banking payments, with the PSR focusing on the initial phase of Variable Recurring Payments (VRPs), which offers consumers more choice and control when making payments.
  • Drive forward, with the Bank of England, work to upgrade the Faster Payments system, and reform of Pay.UK, as well as assess long term retail infrastructure needs:The PSR describes this as critical to providing a sound foundation for future innovation and competition in payments.
  • Sharpen its focus on competition and innovation in payment systems, supporting economic growth and enabling the ecosystem of the future: The PSR plans to build out its innovation capability, focusing on removing unnecessary barriers to payments innovation and helping to create the conditions for innovation in payment systems to thrive. It will also ensure that as it takes action, it considers how that supports economic growth and will play its role in supporting the Government’s growth mission.

The PSR emphasises that continued collaboration and engagement between the government, regulators and the private sector is key to the success of UK payments. It welcomes contact from any stakeholders wanting to discuss any aspect of the Strategy update.

Global: BIS Innovation Hub work programme for 2025-26

On 14 January 2025, the Bank for International Settlements (BIS) updated its Innovation Hub webpage to set out the Innovation Hub's work programme for 2025-26. Items of interest from the work programme include:

  • exploring synergies between different projects and themes, focusing on developing solutions to support central banks in their core responsibilities of the provision of money, monetary policy, payments infrastructure, financial stability, and regulation and supervision;
  • further developing ongoing projects, such as Project Agora, in which partners from seven central banks and over 40 private sector financial institutions are exploring how tokenisation can enhance wholesale cross-border payments; and
  • exploring the potential of central bank community-driven ecosystems in the creation of code and other solutions that can add value to central banking.

BIS comments that implementation of any project is ultimately a decision for partner central banks. In 2024, the Innovation Hub announced that two significant projects developed with central banks would be handed over to those partners.

There is a separate webpage providing details of the Innovation Hub's ongoing, planned and concluded projects.

India: Reserve Bank of India announces implementation of beneficiary name verification facility for RTGS and NEFT systems

On 30 December 2024, the Reserve Bank of India (RBI) announced that all banks who are direct members or sub members of the Real-Time Gross Settlement (RTGS) and National Electronic Funds Transfer (NEFT) systems are advised to offer a beneficiary name verification facility no later than April 1, 2025. This initiative aims to enhance the security of digital fund transfers, reduce errors, and prevent fraud. The National Payments Corporation of India (NPCI) will develop the necessary infrastructure for this feature.

United Kingdom: Bank of England outlines future priorities for supervising FMIs in annual report 2024

On 18 December 2024, the Bank of England (BoE) published its annual report on its supervision of financial market infrastructures (FMIs), which includes an outline of future priorities.

The BoE's main objectives for FMI supervision are to establish a rulebook for FMIs, and promote effective internal co-operation.

Specific areas of focus are:

  • Ensuring financial stability through financially resilient FMIs. This will include undertaking a range of supervisory reviews, technical risk reviews, stress tests, and third-party reviews across the FMI sector. The BoE will also further enhance its use of data to support identification of risks to FMIs;
  • Ensuring FMI services are operationally resilient and not a major financial stability risk in the event of disruption. The BoE will work with FMIs to ensure internal changes are completed effectively and efficiently. The BoE will also continue working with other regulators to roll out and embed the oversight of critical third parties (CTPs) once HM Treasury designates the first CTPs. This power was granted to HM Treasury under FSMA 2023 and the first designations are expected in H2 2025;
  • Enabling safe and resilient innovation in payments, settlement and clearing. The BoE will work with HM Treasury to deliver the outcomes set out in the National Payments Vision; and
  • Implementing and embedding its new responsibilities in a proportionate and robust way. The BoE will develop and implement the rulebook for FMIs. The priority will be to repeal and replace UK EMIR for central counterparties. The BoE expects to consult on the first phase of the rulebook in 2025. It will also publish final rules and guidance on a set of Fundamental Rules for FMIs, following its November 2024 consultation. We reported on the BoE’s consultation and its publication of an updated version of its approach to FMI supervision in our December 2024 Newsletter. You can read more about these developments in our articles here (Fundamental Rules for FMIs consultation) and here (approach to FMI supervision).

United States: CFPB looks at digital payment privacy and consumer protections

On 10 January 2025, the Consumer Financial Protection Bureau (CFPB) announced that it is seeking input, via a Request for Information, on strengthening data privacy protections and preventing harmful surveillance in digital payments, especially those offered through Big Tech. The CFPB warn that digital payment mechanisms collect and use data in excess of what is needed for the transaction, and this data could be used for personalised pricing where a price is based on factors specific to the consumer.

The CFPB seeks input on the effectiveness of existing regulations and how else to address intrusive data collection and personalised pricing. The CFPB also wants to better understand how companies that offer consumer financial products or services collect, use, share and protect consumers’ personal financial data, including data harvested from consumer payments.

Additionally, it seeks input on a proposed interpretive rule outlining how the Electronic Fund Transfer Act, which provides consumers with protections against fraud and errors, applies to new types of digital payment systems.

Comments on the Request for Information must be received by 11 April 2025. Comments on the proposed interpretive rule must be received by 31 March 2025.

United States: CFPB approves FDX application to issue standards for open banking

On 8 January 2025, the Consumer Financial Protection Bureau (CFPB) announced that the Financial Data Exchange, Inc. (FDX) has been approved as a standard setting body under the CFPB’s Personal Financial Data Rights rule. The rule was released in October 2024 and requires financial institutions, credit card issuers, and other financial providers to unlock an individual’s personal financial data and transfer it to another provider at the consumer’s request for free. In June 2024, the CFPB outlined the key qualifications required for approval as a standard setting body under the rule. This is the first order of recognition issued under the rule, and recognises FDX for five years.

FDX is a standard setting organisation with over 200 member organisations including data providers, data aggregators, data recipients, service providers to open banking participants, depository and non-depository commercial entities, trade and industry organisations and other non-commercial entities such as consumer groups.

New Zealand: Commerce Commission publishes draft decision to reduce merchant service fees for card payments

On 18 December 2024, the Commerce Commission issued its draft decision to reduce fees paid by New Zealand businesses for accepting Visa and Mastercard payments. The average merchant service fee for small businesses is around 1.2% to 1.5%. These fees are passed on to consumers through increasing the cost of goods and services, and imposing surcharges.

In an attempt to reduce costs for consumers, the Commission seeks to reduce fees charged to businesses by $260 million a year, and set the expectation that payment providers and businesses should pass the savings to consumers rather than keeping hold of the difference. The Commission expects that if the decision is implemented, consumers would benefit from lower surcharges of around 0.7% to 1%, or lower prices for goods and services.

The Commission is seeking feedback on its draft decision by 5pm on 18 February 2025.

European Union: European Court of Auditors report on EU digital payments finds price interventions and account data sharing are areas for improvement

On 9 January 2025, the European Court of Auditors published its ‘Special report 01/2025: Digital payments in the EU – Progress towards making them safer, faster, and less expensive, despite remaining gaps’. The report covers the period from 2013 to 2023 and focuses on policies and regulation in the area of payments in the European Union (EU).

The report found that, overall, the EU’s approach to digital payments has contributed to making them safer, faster, and less expensive for users. However, it identified two key areas for improvement in the EU’s regulatory framework, namely:

  • the criteria for assessing the adequacy of price interventions are unclear and there are no periodic reviews; and
  • there are gaps in the legal framework regarding account data sharing under open banking.

In light of the above, the report made five recommendations for further action to the European Commission. In outline, these recommendations are:

  1. To set out the criteria for price interventions in the area of digital payments and carry out periodic reviews;
  2. To develop and implement a data monitoring strategy in the area of digital payments;
  3. To propose performance indicators and set targets for digital payments;
  4. To fight discrimination based on payment account location with better enforcement rules and analyse virtual payment accounts; and
  5. To strengthen efforts to achieve a level playing field in authorisation and supervision.

Global: FSB publishes final recommendations on data flow, regulation and supervision in cross-border payments

On 12 December 2024, the Financial Stability Board (FSB) published the following documents containing recommendations aimed at advancing priority actions under the G20 roadmap for enhancing cross-border payments:

  • Final report containing final recommendations (following its July 2024 consultation) to promote alignment and interoperability across data frameworks related to cross-border payments. The recommendations aim to strengthen consistency in the regulation and supervision of banks and non-banks in their provision of cross-border payment services in a way that is proportionate to the risks associated with these activities. The FSB has also published the consultation responses received and an overview of those responses. The FSB is establishing a forum on cross-border payments data to progress the recommendations and identify emerging issues to be addressed. The forum will comprise public sector stakeholders in the fields of payments, anti-money laundering (AML) and counter-terrorist financing (CTF), sanctions, and data privacy and protection. The forum will also establish a private sector advisory group.
  • Final report containing final recommendations (following its July 2024 consultation) for regulating and supervising bank and non-bank payment service providers (PSPs) offering cross-border payment services. The recommendations aim to mitigate unintended frictions that may pose significant challenges to improving the cost, speed, transparency and accessibility of cross-border payments. The FSB has also published the consultation responses received and an overview of those responses.

The FSB states in a related press release that as part of its work in this area and to enhance private sector engagement, it is inviting market stakeholders in cross-border payments to join its taskforce on legal, regulatory and supervisory matters (LRS taskforce). Nominations of individuals to join the LRS taskforce should be emailed to [email protected] with “LRS taskforce” in the subject line by 31 January 2025.

United Kingdom: Banking Act 2009 (Wholesale Cash Oversight Fees) Regulations 2024 published

The Banking Act 2009 (Wholesale Cash Oversight Fees) Regulations 2024 (SI 2024/1344) were made on 16 December 2024 and laid before Parliament on 17 December 2024.

The Regulations set out a scale of fees that the Bank of England (BoE) may charge to certain entities that operate in the wholesale cash distribution (WCD) market. The Regulations apply only to persons recognised by HM Treasury (HMT) under Part 5A of the Banking Act 2009 as performing a relevant function in relation to a WCD activity and having market significance (recognised persons). In any one calendar year, the BoE may charge a recognised person an annual oversight fee of up to £400,000 and a special projects fee up to a maximum of £150,000. HMT has not yet made any recognition orders relating to Part 5A.

The Regulations do not apply to persons that are recognised by HMT as having systemic significance for the WCD market. HMT does not expect to recognise any person in the near term as having systemic significance.

The Regulations come into force on 24 January 2025.

Chapter 2

Regulatory Developments: Digital Assets

European Union: MiCA updates

On 13 December 2024, the European Commission adopted a Delegated Regulation containing regulatory technical standards (RTS) specifying the adjustment of own funds requirement and minimum features of stress testing programmes of issuers of asset-referenced tokens or of e-money tokens under the EU Markets in Cryptoasset Regulation (MiCA). The Council of the EU and the European Parliament will now scrutinise the Delegated Regulation. If neither objects, the Regulation will be published in the Official Journal of the EU and enter into force 20 days after publication.

On 16 December, the European Commission adopted the following Delegated Regulations supplementing MiCA:

  • A Commission Delegated Regulation laying down RTS specifying the data necessary for the classification of cryptoasset white papers and the practical arrangements to ensure that such data is machine-readable, together with an Annex;
  • A Commission Delegated Regulation laying down RTS specifying the minimum content of the governance arrangements on the remuneration policy of issuers of significant asset-referenced or e-money tokens; and
  • A Commission Delegated Regulation laying down RTS specifying the procedure and timeframe for an issuer of asset-referenced tokens (ARTs) or of e-money tokens (EMTs) to adjust the amount of its own funds.

The next step is for the Delegated Regulations to be published in the Official Journal of the EU. They will come into force 20 days after publication.

On 17 December, ESMA published a short statement in relation to the non-unified approach to transitional periods by member states in relation to MiCA. The regime provides additional time to transition to the MiCA regime for cryptoasset service providers (CASPs) that offered their services prior to 30 December 2024. ESMA provided a list of grandfathering periods for each member state on 11 December.

Also on 17 December, ESMA published a number of policy documents in relation to MiCA including:

  • Regulatory technical standards on market abuse, specifying systems and procedures to prevent and detect market abuse in cryptoassets, the template for reporting suspected market abuse, and coordination procedures between competent authorities for detection and sanctioning of cross-border market abuse situations;
  • Guidelines on reverse solicitation that confirm that the exemption should be understood as very narrowly framed and regarded as the exception, not to be used to circumvent MiCA requirements. The exemption only applies to cases where the client is the exclusive initiator of the service. Guidance is provided on the limited circumstances where this may be the case;
  • Guidelines on suitability that specify how CASPs providing advice on cryptoassets or portfolio management of cryptoassets have to give suitable recommendations to their clients or make suitable investment decisions on their behalf. This aligns with the MiFID II requirements so CASPS providing advice under both MiFID II and MiCA are subject to similar requirements;
  • Guidelines on cryptoasset transfer services that aim to ensure investor protection for clients transferring cryptoassets, by specifying policies and procedures that CASPs should have in place;
  • Guidelines on qualification of cryptoassets as financial instruments, providing conditions and criteria for the qualification of cryptoassets as financial instruments. The guidelines aim to provide more clarity about the scope of application of MiCA versus other sectoral regulatory frameworks such as MiFID II; and
  • Guidelines on the maintenance of systems and security access protocols that apply to offerors and persons seeking admission to trading who are not subject to the same operational resilience standards under MiCA and DORA as CASPs or issuers. The guidelines provide for a streamlined set of principles for these entities to manage their ICT risks.

In addition, on 17 December the European Commission adopted a Delegated Regulation relating to RTS specifying the content, methodologies and presentation of information in respect of sustainability indicators concerning the adverse impacts on the climate and other environment-related adverse impacts, which supplements MiCA. The Annex to the Delegated Regulation sets out a template for presenting information on principal adverse impacts on the climate and other environment-related adverse impacts in cryptoasset white papers and on the website of a CASP. The next step is for the Delegated Regulation to be published in the Official Journal of the EU. It will come into force 20 days after publication.

On 18 December, the EBA published its final report on guidelines on templates to assist competent authorities in performing their supervisory duties regarding issuers' compliance under Titles III and IV of MiCA. The guidelines are addressed to competent authorities, issuers of ARTs and issuers of EMTs. They specify common templates and instructions for issuers to provide competent authorities and the EBA with the necessary information to cover identified reporting data gaps. The guidelines also include common templates and instructions that issuers should use to collect the data they need from relevant CASPs, contained in annexes in section 4 of the report:

The EBA has also published a visual explainer providing guidance on which templates should be submitted by the different types of issuers. The EBA states that changes to the draft guidelines were made in the light of the consultation responses received. The guidelines will apply two months after publication on the EBA website of the translations in the EU official languages.

Also on 18 December, the European Commission adopted the following Delegated Regulations supplementing MiCA:

  • A Delegated Regulation relating to RTS specifying the detailed content of the information necessary to carry out the assessment of a proposed acquisition of a qualifying holding in an issuer of an ART; and
  • A Delegated Regulation relating to RTS specifying the detailed content of information necessary to carry out the assessment of a proposed acquisition of a qualifying holding in a CASP.

The next step is for the Delegated Regulations to be published in the Official Journal of the EU. They will come into force 20 days after publication.

On 30 December 2024, MiCA became fully applicable.

United Kingdom: FCA publishes discussion paper on admissions and disclosures and market abuse regime for cryptoassets

On 16 December 2024, the FCA published a discussion paper (DP24/4) on admissions and disclosures (A&D) and the market abuse regime for cryptoassets (MARC). This is part of a series of publications by the FCA (and the first since the change in government in July 2024) designed to facilitate the development of the UK’s cryptoasset regulatory regime.

For the purposes of the discussion paper, ‘cryptoassets’ refers to spot cryptoassets, such as stablecoins and unbacked cryptoassets (eg Bitcoin and Ether). It does not include those cryptoassets already captured under the existing list of ‘specified investments’ in Part III of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (RAO), such as tokenised financial instruments, or the rights to the same, which includes security tokens.

A&D regime

  • The discussion paper outlines the proposed A&D regime, key exemptions (as HM Treasury is expected to introduce legislation that will prohibit public offers of cryptoassets in the UK but which will also include exemptions from the prohibition), and other applicable requirements (eg compliance with Consumer Duty may require disclosures beyond those under the A&D regime).
  • The FCA points out that existing regimes, such as the financial promotions regime and Consumer Duty, are broad in scope and interact with elements of the proposed A&D regime. Similarly, the proposed future fiat-referenced stablecoins regime may also include disclosure requirements that intersect with those under the A&D regime. It is evaluating the best approach for handling regulated stablecoins under the future stablecoin regime to avoid duplicative disclosure requirements.

MARC

  • As first set out in the government’s February 2023 consultation, MARC will be based on parts of the UK Market Abuse Regulation (UK MAR) tailored for cryptoasset activity. These include prohibitions on: insider dealing; unlawful disclosure of inside information; and market manipulation, including dissemination of false or misleading information. The FCA expects the government to base the definitions of these activities on the definitions used in the existing market abuse regime.
  • Elements of the FCA regime would include a requirement that Cryptoasset Trading Platforms (CATPs) implement rigorous systems and controls to prevent, detect, and disrupt market abuse on their platforms. Under this approach, CATPs would be able to choose which controls, systems, and surveillance tools best suit their respective business models. There would be a similar requirement for cryptoasset intermediaries.

The discussion paper closes on 14 March 2025. The FCA will consider the feedback received and conduct further industry engagement to determine its next steps. It will consult via a consultation paper on any of the proposals outlined in the discussion paper if it proposes to adopt them as part of its final rules. The FCA’s crypto roadmap (reported on in our December 2024 Newsletter) states that a related consultation paper is due to be published in Q3 2025.

For more on this development, take a look at our article.

Philippines: SEC publishes draft crytpoassets rules

On 20 December 2024, the Philippines Securities and Exchange Commission (SEC) published a draft version of its “SEC Rules on Crypto-Assets Service Providers (CASP Rules)” for consultation. Cryptocurrency adoption has become particularly popular in the Philippines, perhaps in part due to its young population, with an average age of 25. In light of this, the SEC aims to address risks such as market manipulation and fraud, whilst also bolstering innovation.

The proposed regulations include the following:

  • Cryptoassets are categorised as digital value representations utilising distributed ledger technology. The new framework will govern activities such as trading, custody, and public offerings of these assets;
  • CASPs are required to register with the SEC and obtain licences, adhering to requirements and standards, including being stock corporations registered with the SEC, having at least four staff members based in the Philippines, meeting minimum capital requirements, demonstrating compliance with CASP guidelines and submitting a complete application for authorisation;
  • CASPs intending to offer cryptoassets to the public must submit detailed disclosure documents to the SEC at least 30 days prior to marketing. These documents should include the offeror’s profile, the underlying technology, potential risks, and warnings about possible value loss;
  • CASPs must align their systems with the National Cybersecurity Plan and undergo regular audits to ensure resilience against emerging threats; and
  • CASPS must also adhere to anti-money laundering laws, insider trading prevention, and anti-market manipulation practices.

The consultation closed on 18 January 2025.

United Kingdom: PRA data request on exposure to cryptoassets including tokenised assets and stablecoins

On 12 December 2024, the PRA published a data request in the form of a questionnaire, and an accompanying press release, on firms’ exposures to tokenised assets, stablecoins and other cryptoassets.

According to the press release, in order to inform the PRA and the Bank of England’s work on cryptoassets, the PRA is gathering information on firms’ current and expected future cryptoasset exposures and their application of the Basel framework for the prudential treatment of cryptoassets.

Firms have until 24 March 2025 to respond.

European Union: EBA report on tokenised deposits

On 12 December 2024, the European Banking Authority (EBA) published a report on tokenised deposits which discusses tokenised deposit projects observed by the EBA, and considerations regarding the appropriate regulatory framework.

Key takeaways include:

  • At present, there are few examples of tokenised deposits globally, but nonetheless there is evidence of growing interest among the largest credit institutions in the EEA to engage in the activity of deposit tokenisation in the next two years or more.
  • Among the potential benefits of tokenised deposits, the EBA discussed the use of programmability, and facilitation of compliance with AML/CFT requirements.
  • Challenges include limitations where the level of technological and financial education of retail users is insufficient, and potential difficulties around regulatory classification, operational risks, liquidity management, and implementation of AML/CTF controls for DLT-based transactions.
  • In terms of regulation the report helpfully clarifies that, to the extent a tokenised deposit involves recording the deposit claim on the DLT instead of a traditional ledger, this does not per se alter the fundamental nature of the claim and therefore should qualify as a deposit. Where the meaning of “deposit” under the Deposit Guarantee Schemes Directive (DGSD) is met, the regulatory requirements relating to deposit-taking activity would be relevant (such as in the Capital Requirements Directive and Regulation), as opposed to requirements relating to cryptoassets under the Markets in Crypto-assets Regulation (MiCA). That being said, much of the report concerns the “account-based” model of tokenised deposits (which resemble conventional deposits recorded on traditional bank ledgers) as opposed to “token-based” models, which the EBA notes would require more careful assessment in terms of regulatory classification.

The EBA will continue to monitor this space and promote discussion with competent authorities, as well as engage with industry to identify any need to issue guidance or recommendations. The EBA also notes that, for now, it has not identified a need to amend the DGSD definition of “deposit”.

United Kingdom: Bank of England publishes retail CBDC progress update and design note on blueprint framework

On 14 January 2025, the Bank of England (BoE) published a summary of work over the past year on a digital pound, including how it relates to the evolving payments landscape. The BoE notes that significant progress has been made in the design phase of the digital pound project in the past year.

Alongside the progress update, the BoE has also published a design note outlining its initial thinking on the potential aims, scope and focus areas of a digital pound blueprint. It welcomes feedback on the points raised in the design note, in particular on whether the aspects highlighted are a suitable set of topics for the blueprint. Feedback should be sent via email to [email protected].

Next steps will include the following:

  • The BoE will start publishing design notes to present its emerging thinking on specific aspects of a digital pound, the first of which is the above note on a blueprint framework.
  • The BoE will launch a Digital Pound Lab this year, which will provide a simulated environment to test the potential capabilities of a digital pound, offering critical insights into the feasibility of different use cases.
  • The current Engagement Forum and Academic Advisory Group will continue, but the BoE will wind down the Technology Forum. While engagement focused on technology will continue, it will be more direct and detailed, supported by the Digital Pound Lab.
  • As part of the National Payments Vision (NPV) (see our related article here), the Payments Vision Delivery Committee is being established to ensure co-ordination between the regulators and provide a mechanism to facilitate prioritisation decisions on payments initiatives. Its work will be informed and supported by the Vision Engagement Group. The design phase of the digital pound will continue alongside the Committee’s work, overseen by the existing joint HM Treasury and Bank of England Digital Pound Taskforce, with input from the Engagement Forum. The BoE points out that as the chairs of the Taskforce are also members of the Payments Vision Delivery Committee, this will ensure coherence across both governance bodies.

The BoE will continue to publish minutes of its industry forums and share relevant research and policy outputs on its digital pound webpage, ensuring that stakeholders remain informed as the project progresses.

El Salvador: Government rolls back its Bitcoin project under IMF agreement

On 18 December 2024, the International Monetary Fund (IMF) published a press release announcing a staff-level agreement on a $1.4 billion Extended Fund Facility (EFF) to support the El Salvador government’s reform agenda regarding fiscal and external sustainability. Part of the work will see El Salvador scale back its Bitcoin project to reduce its risks. These legal reforms will make the acceptance of Bitcoin by the private sector voluntary and confine Bitcoin-related economic activities in the public sector. The government’s participation in the crypto e-wallet will be gradually unwound. Additionally, regulation and supervision of digital assets will be enhanced to safeguard financial stability and consumer and investor protection.

South Korea: FSC to ease institutional crypto trading restrictions

On 9 January 2025, it was reported that South Korea’s financial regulator, the Financial Services Commission (FSC), plans to gradually ease restrictions on institutional crypto trading.

This follows the passing of its Virtual Asset User Protection Act in July 2024 which aimed to curb unfair trading practices on an institutional level. Under this law, banks are instructed to restrict institutional trading. Retail traders can still access the market from regulated local exchanges. The change would mean retracting from this restrictive position in an attempt to align with global regulatory practice.

Chapter 3

Market Developments

European Union: First crypto platforms approved under Europe’s MiCA regime

On 30 December 2024, it was reported that the Dutch regulator had awarded licences to four digital asset companies under the new EU Markets in Crypto-Assets Regulation (MiCA). These are among the first licences awarded under the new regime. The licence allows Moonpay, BitStaete, FinTech ZBD and Hidden Road to operate across every nation in the EU. The EU set a 30 December 2024 deadline for its member states to implement MiCA.

United Arab Emirates: MANTRA Blockchain to tokenise $1bn of real-world assets for UAE firm DAMAC

On 9 January 2025, it was reported that MANTRA, a blockchain designed for tokenisation of real-world assets, had entered into an agreement with United Arab Emirates (UAE) based property conglomerate DAMAC Group to tokenise at least $1 billion of the firm’s assets to blockchain rails. The deal will allow investors to finance DAMAC’s property portfolio companies spanning various sectors. The asset tokenisation aims to streamline traditional investment processes and increase accessibility for both retail and institutional investors by fractionalising high-value assets.

France: Bybit will stop crypto services for French users by January 2025

On 18 December 2024, it was reported that Bybit, a global crypto exchange, had announced that it will terminate withdrawal and custody services in France. This announcement comes as a response to increased regulatory pressures from French financial authorities. Bybit has advised French users to withdraw their funds before 8 January 2025. All unclaimed assets above USDC 10 will be transferred to Coinhouse, whilst assets of USDC 10 or less will be charged a fee of USDC 10 and the account will be closed. These transfers will start between 8 January and 16 January, temporarily stopping withdrawals during the process. Bybit has also clarified that there will be no fees regarding the conversion of assets to USDC or the transfer of funds to Coinhouse.

Thailand: Thailand to trial cryptocurrency payments for tourists in Phuket

On 10 January 2025, it was reported that Deputy Prime Minister and Finance Minister Pichai Chunhavajira had announced that Thailand had decided to trial cryptocurrency payments in Phuket as part of a pilot programme aimed at offering foreign visitors an alternative payment method. The initiative aims to make digital transactions more accessible in tourism-centric cities, helping Thailand remain competitive in attracting tourists.

Before making any Bitcoin purchases, tourists participating in the programme will be required to register their Bitcoin through a Thai exchange and complete identity verification. To facilitate transactions, a clearing house will convert Bitcoin payments into THB.

The programme will reportedly comply fully with all existing legal standards, with no need for any legal amendments.

European Union: ECB welcomes Bulgarian market to TIPS

On 19 December 2024, the European Central Bank (ECB) announced that the Bulgarian market had successfully joined the TARGET Instant Payment Settlement (TIPS) service, following successful migration in December 2024.

Europe: New bank-backed EPI processes first e-commerce transactions

On 7 January 2025, it was reported that the European Payments Initiative (EPI), a bank-backed venture initially set up to rival Visa and Mastercard in Europe, had completed its first e-commerce transactions using its Wero e-commerce payment solution between the end of November and mid-December 2024. Further e-commerce transactions will be conducted in the first half of this year, before officially launching in Germany over the summer, Belgium in autumn, and France at the start of 2026. In-store payments will be added in 2026 alongside other capabilities such as BNPL, merchant loyalty, and expense sharing. The EPI already operates a person-to-person wallet which, according to its November 2024 announcement, has 14 million users.

United Kingdom and Europe: AstroPay introduces multicurrency wallet for cross-border payments

On 17 December 2024, it was reported that the cross-border finance fintech Astropay had introduced its multicurrency wallet. The wallet will let users store, manage and exchange multiple currencies, helping them simplify international travel and work. This news comes alongside announcements that AstroPay has secured an electronic money institution (EMI) licence in Denmark which allows it to expand its services to Denmark, Spain, and Portugal. It looks to extend services to additional European Union countries such as Germany, France, Italy and Poland by the end of 2025.

India: WhatsApp Pay available to all Indian users

On 3 January 2025, it was reported that meta-owned WhatsApp Pay has been given approval by the National Payments Corporation of India (NPCI) to roll out its person-to-person payments service to all Indian users. The service makes it possible for people to send payments directly to WhatsApp contacts. It launched in 2024 but the NPCI mandated a phased rollout, limiting it to 40 million users at first, and then 100 million users in 2022. Now, all limits have been removed, meaning the full 500-million strong customer base in India will have access to the service.

United Kingdom: Monzo introduces sign language chat

On 18 December 2024, it was reported that hearing-impaired customers of Monzo can now chat with the bank’s customer support team via the SignLive app, an online British Sign Language (BSL) interpreting service. Users simply need to log in to the SignLive app and find Monzo in the directory. This connects customers with interpreters who relay the conversation to a Monzo customer support team member in real-time using video relay services. Monzo states that this is part of their commitment to accessibility and inclusion. They follow in the footsteps of Santander and Nationwide, who have both recently introduced similar services.

Australia: NAB aims to phase out passwords for internet banking in five years

On 17 December 2024, it was reported that National Australia Bank (NAB) has set a goal to phase out password use in internet banking within the next five years. It states that passwords will be replaced with security measures such as passkeys and biometric recognition technology. The idea is that by removing passwords, that are often used by people across multiple sites and platforms, the risk of scams and fraud from cyber-attacks will be reduced.

Chapter 4

Surveys and Reports

European Union: ECB study on payment attitudes of consumers in the euro area

On 18 December 2024, the European Central Bank (ECB) published its study on the payment attitudes of consumers in the euro area (SPACE) and a related webpage. The focus is on payment behaviour and preferences. The study collected results from 50,000 euro area consumers via online and telephone interviews conducted between September 2023 and June 2024. Respondents were asked about topics such as the benefits of using cash and cards, how they withdraw cash, and access to financial products.

Some key findings include:

  • Online payments: The share of online payments in consumers’ day-to-day payments has continued to increase. In 2024, 21% of consumers’ day-to-day payments were made online, compared to 17% in 2022. In terms of payment value, 36% of day-to-day payments were online, compared to 28% in 2022. For online payments, the most frequently used method was cards, representing 48% of transactions. The share of e-payment solutions, i.e. payment wallets and mobile apps, was 29%, a rise from 26% in 2022.
  • Point of sale (POS) payments: For POS payments, the most frequently used method was cash, used in 52% of transactions. However, this is a decrease from 58% in 2022. Cash was the most frequently used payment method for small-value payments at the point of sale, in line with previous surveys. For payments over €50, cards were the most frequently used payment method.
  • Payment preferences: Stated payment preferences were unchanged from 2022. In 2024, 55% of euro area consumers expressed a preference for cards and other cashless payments when paying in a shop, while 22% preferred cash and 23% had no clear preference. The perceived key advantages of cash were, first, its anonymity and protection of privacy and, second, the perception that it makes consumers more aware of their own expenses. The perceived key advantages of card payments were that consumers do not have to carry cash with them, and that card payments are faster and easier. A majority of the surveyed euro area consumers - 58% - said they were concerned about their privacy when performing digital payments or other banking activities.
  • Access to cash: Most surveyed euro area consumers said they were satisfied with their access to cash, but this satisfaction has decreased slightly. A large majority, i.e. 87% of consumers, find it fairly easy or very easy to get to an ATM or a bank. Most consumers, i.e. 57%, never paid a fee when withdrawing cash from an ATM whereas 11% paid a fee always or most of the time.

United States: CapitalOne buy now pay later statistics

On 31 December 2024, CapitalOne updated their report ‘Buy Now Pay Later Statistics’ which covers key buy now pay later (BNPL) trends in the U.S.

Key findings include:

  • In 2024, there were 86.5 million BNPL users in the U.S., up 6.92% year-over-year (YoY).
  • The average BNPL loan amount is $135 over six weeks, whereas traditional instalment loans average $800 over 8-9 months.
  • 89.3% of BNPL users report making all payments on time and in full.
  • BNPL users are more likely to be employed; 70.6% have full time or part-time jobs.
  • In 2024, BNPL purchase volume is expected to total $132.7 billion, up 14.1% YoY.

Global: Chainalysis report on 2024 crypto hacking

On 19 December 2024, Chainalysis released a webpage previewing its comprehensive 2025 Crypto Crime Report. According to the preview:

  • In 2024 the amount of funds stolen rose by about 21.07% year-over-year (YoY) to $2.2 billion, with the number of hacking incidents increasing from 282 in 2023 to 303 in 2024.
  • Between January and July 2024, the total value stolen had already reached $1.58 billion, which is approximately 84.4% higher than the amount stolen during the same period in 2023. The intensity of crypto hacking changed around mid-year, with the upward trend in 2024 slowing significantly after July and then remaining relatively steady.
  • In 2023, hackers affiliated with North Korea stole around $660.50 million across 20 incidents. In 2024, this figure increased to $1.34 billion across 47 incidents, representing a 102.88% rise in value stolen. These figures account for 61% of the total amount stolen for the year and 20% of the total incidents.
  • There was a noticeable shift in focus from decentralised finance platforms to centralised services in 2024. Since centralised exchanges handle large amounts of user funds, a private key compromise can have devastating effects. For instance, the $305 million DMM Bitcoin hack, one of the largest crypto hacks to date, may have resulted from private key mismanagement or inadequate security measures.

Global: Global Payments releases 2025 Commerce and Payment Trends Report

In December 2024, Global Payments Inc., a provider of payment technology and solutions, released its annual Commerce and Payment Trends Report and accompanying press release. The report is based on discussions with industry experts and a survey of 600 payment decision makers and influencers.

Key payments trends identified include:

  • AI's impact: AI has transitioned from a theoretical concept to a practical tool, significantly enhancing client services, marketing, and fraud protection. While enterprises are cautious about data privacy, small and midmarket businesses are more enthusiastic about AI applications.
  • Embedded payments in B2B: The benefits of embedded payments, previously popular in consumer settings, are now being leveraged in B2B transactions, streamlining business processes and supply chains.
  • Digital security and fraud prevention: With the rise of sophisticated fraud, organisations are adopting advanced security measures like biometrics and tokenisation to protect transactions.