Many FinTech companies registered in, say, Singapore operate across the region outside the regulatory regime of the markets in which they operate.
Banks, which provide similar services and, even, money transmitters do not have that privilege.
The Wirecard case should draw attention to the lack of protection for user’s money and to ensure that that money is retained within the jurisdiction of the customer. Who’d have thought that the world should be looking to China for leadership on regulatory affairs?
To conclude: who wants a lesson in irony?
In the mid 1990s, a Chinese owned bank applied for a banking licence as a branch in London. The regulators refused and eventually it closed the fully equipped offices it had commissioned in preparation for launch and continued only as a representative office.
The reason was that the UK’s regulators did not believe that the Chinese government would stand behind the bank if it fell into difficulty and that would expose the UK banking system to risk.
Only a couple of years later, when Barings collapsed, the UK Government, through the regulators, refused to step in to rescue it or support its customers which were not retail banking customers and therefore outside the scope of the deposit guarantee scheme.
When Loot collapsed, Wirecard did not support it.
That begs the question – fundamentally, what is the difference between Wirecard and the UK subsidiary of a Chinese bank a quarter of a century ago?
Answer – a worrying lack of understanding of the nature of the businesses that are being regulated.
It might not say “bank” over the door but many FinTech companies are providing banking services.
Regulators should stop messing about and regulate them as such.
© 2020 Nigel Morris-Cotterill
All rights reserved.
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