Fintech in International Capital Markets
FinTech in International Capital Markets by Gabriel Callsen and Rowan Varrall
ICMA FinTech Advisory Committee ICMA’s FinTech Advisory Committee (FinAC) reconvened on 23 September and 1 December 2021. In September, FinAC discussed latest developments in relation to digital currencies and implications for the international debt capital markets, as well as FinTech and sustainability. The spectrum of digital currencies is broad, ranging from cryptocurrencies such as Bitcoin, which are not backed by any underlying asset, to stablecoins, pegged to a fiat currency, for instance, and central bank digital currencies, which constitute a direct liability of a central bank. Use cases vary and it is important to distinguish implementation in wholesale markets such as intragroup or interbank payments, foreign exchange, and deliveryversus-payment (DvP) transactions from retail use, for example, to promote financial inclusion or enable “programmable money” for tax collection purposes. While the key features and benefits are broadly understood, the key risks, such as disintermediation of the existing payment systems and market infrastructure, are less so and warrant further scrutiny. The role of FinTech to support sustainable bond markets continues to be a growing area of interest, following a previous roundtable discussion. ICMA staff provided a tour d’horizon of latest developments in Asia-Pacific, including official sector as well as private sector initiatives. Data management capabilities will be of critical importance to meet forthcoming ESG disclosure obligations in the EU, which are summarised in a recent ICMA publication. To increase transparency and promote best practices, the Executive Committee of the Principles issued in June 2021 Guidelines for Impact Reporting Database Providers alongside a mapping of such providers that ICMA keeps updated. The annual consultation, conducted in Q4 2021 by ICMA on behalf of the Executive Committee, sought feedback on usage and potential expansion, amongst other considerations.
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In December, the agenda featured a presentation on Project Genesis on green bond tokenisation: a joint initiative between the HKMA and the BIS Innovation Hub Hong Kong. Members furthermore exchanged views on ICMA initiatives, including the proposal for a common data dictionary for primary bond markets. Further information on the FinAC can be found on ICMA’s dedicated FinTech webpage. Contact: Gabriel Callsen gabriel.callsen@icmagroup.org
Common Domain Model for repo and bonds: ERCC survey results and next steps Following completion of phase 1 of the CDM for repo and bonds, ICMA conducted a survey amongst the ERCC community to help determine next steps, understand member firms’ priorities, considerations for implementation, as well as IT budget allocation in the next five years. 19 organisations took part in the survey, including a variety of stakeholders which is reflective of the ERCC’s composition.
Survey Participants Vendor firm 11%
Other 5% Buy-side 11%
Regulated market infrastructure 32%
Sell-side 42%
