On 20 April 2022 (Central Bank of Ireland run date 21 April 2022), the Irish regulator authorised Booking Holdings Financial Services International Limited as an electronic money institution.  The authorisation comes 21 months following its incorporation on 17 July 2020.

The company, in addition to emoney, is authorised to provide payment services 3b, 3c and 5.  These allow the company to:

*  (3) Execution of payment transactions, including transfers of funds on a payment account with the user’s payment service provider or with another payment service provider:

• 3 (b) Execution of payment transactions through a payment card or a similar device;
• 3 (c) Execution of credit transfers, including standing orders

*  5. Issuing of payment instruments and/or acquiring of payment transactions

Ireland is now home to 19 authorised electronic money institutions, 20 authorised payment institutions and 4 standalone account information service providers. We have updated our regulated fintech Map to version 7.0 where we showcase these firms.

Our Peter Oakes spoke with Charlie Taylor of the Sunday Business Post on the authorisation of emoney and payment services firms and the issues firms were facing getting authorised in Ireland.  See Charlie's article of 10 April 2022 titled Defensive attitude of Central Bank putting off fintech investors.



In the article Peter Oakes said:

• ​Speaking to the Business Post, Peter Oakes, a former Central Bank enforcement director and founder of Fintech Ireland, an industry group, said some companies which had sought authorisation through the Irish regulator had found it difficult to deal with.
• “The Central Bank is at times coming across as unnecessarily defensive and surprisingly unprepared for meetings with applicants. Wrong or right, this is a situation which has developed and one the regulator is not sufficiently in front of,” he said.
• Oakes suggested that radical changes were not required to right the current situation.
  “A handful of straightforward enhancements should not only solidify the regulator’s objectives but create a better-informed industry. At the very least it would make clear whether Ireland is a ‘go-to’ effective regulatory jurisdiction for innovation and should prevent the state scoring an own goal by losing out on quality firms moving here because of the current situation,” he said.
  The Central Bank admitted in a statement that authorisation could take time, but said operating a robust authorisation process was “solely aimed at protecting consumers and investors”.

A trawl through the minutes of the Central Bank of Ireland's Commission minutes makes for interesting reading on this topic.  

On 7 December 2021 (not published until 8 February 2022), the record of minutes noted that:

• [Central Bank's Ed Sibley] a sizeable pipeline of change across multiple sectors, including authorisation activity, such as a high volume of Payment Institution/E-Money Institution authorisations. Work continued with applicant institutions on improving the quality of submissions.  in particular with regard to risk and compliance frameworks.
• One member asked if there were any particular trends emerging concerning authorisations.
• Mr Sibley responded that there continues to be very significant change across many sectors. For banking specifically there was a significant growth in international banking sector here because of Brexit, with very significant growth in size, complexity and levels of employment.
• [Central Bank's Derville Rowland added that] "She also noted the establishment of a new type of entity, virtual asset service providers (VASPs), which were now required to register with the Bank for the purposes of anti-money laundering (AML)​."  

​On 1 March 2022 (not published until 19 April 2022, the day before Bookings Holding was authorised), a partially omitted record of minutes dealing with the Authorisation Process (involving Mary Elizabeth McMunn and Colm Kincaid) was released, the published minutes noted that:

• Pipeline levels have remained consistently high and not all applications convert to supervised firms.
• the Bank substantially meets its published service standards across the various sectors.
• Reprioritisation of supervisory resources into authorisation work has been a key response to authorisation challenges; however, this is not without risk. 
• Queries were raised in relation to some external impressions that securing authorisation in Ireland can be more onerous than other jurisdictions, and whether there was benchmarking undertaken. Other queries focused on whether post-Brexit authorisation applications had peaked and on the Bank’s engagement with advisors to applicant firms and challenges with ensuring relevant board level oversight within newly authorised entities.
• ​In response, it was noted that the Bank applies EU standards and norms to its authorisation process, but was seeking to be forward looking in its approach; it wanted resilient firms that can cope with changing circumstances, and that is the robustness of the approach that is taken. It was noted that there was a strong drive at EU level to have rigorous authorisation processes and a strong drive for substance. In relation to the number of applicants, this was not expected to fall off and would in all likelihood increase. While there were levels of engagement with advisors, it was essential to get to the institutions themselves. Early engagement with some of the firms at expression of interest stage was showing a stronger understanding of the Bank’s expectations. In terms of board representation, this was a real and genuine challenge and it was a wider challenge for the State to make sure the expertise is there.
• The Commission noted the update and agreed to keep under consideration how best to support this work.

Visit our Fintech Ireland Maps page for more information about the fintech and regtech companies we map.

Other Reading:

1) Irish Times Article 20 March 2022: https://www.irishtimes.com/business/financial-services/winklesvoss-twins-secure-irish-e-money-licence-for-gemini-payments-1.4831606
2) Linkedin Post 20 March 2022: https://www.linkedin.com/posts/peteroakes_paymentservices-facebook-cryptoasset-activity-6911588283806277632-GaM0

This blog is a copy and paste of the CompliReg blog located here -

​This material first appeared on Linkedin here 

​This blog by Peter Oakes, Founder of Fintech Ireland and CompliReg.  Peter qualified as a lawyer in Australia, the UK and Ireland.  He is a director of a number of regulated innovative fintech and adviser to fintech and crypto firms and their professional service providers. Contact him here and follow him on Linkedin and Twitter (Fintech Ireland Twitter).
 
The first Irish regulated funds to take exposure to crypto-assets have been approved by the Central Bank of Ireland (CBI).

The funds, both Qualifying Investor AIFs (QIAIF), will obtain indirect exposure to Bitcoin, by acquiring cash-settled Bitcoin Futures traded on the Chicago Mercantile Exchange (CME). Before you get too excited looking to by some of the digital asset via the QIAIFs note that this channel of exposure is RESTRICTED TO PROFESSIONAL INVESTORS. [NB: As recently as March 2022 the the Central Bank has issued a warning on the risks of investing in crypto assets].  We have provided further details about the regulatory crypto investing landscape in Ireland under 'Further Reading' below.
 
Last month the CBI informed industry bodies that it had approved in principle at least one QIAIF with a low level of exposure to cash settled Bitcoin futures traded on the CME.
 
The two unnamed QIAIFs are the first type of such funds to provide indirect crypto exposure and approved by the CBI.
 
If you want your existing QIAIFs or you wish to establish a new QIAIF to obtain exposure to crypto assets, get in touch (details above).  I am asked on a regular basis by institutional investors and professional investors how they can get exposure to cryptocurrencies and other digitalassets via regulated products. Unless you are able to gain direct exposure via a virtual asset service provider (VASP), the Irish QIAIF model (non-UCITS) might be your avenue. Note however that the CBI has said it is highly unlikely to approve a UCITS proposing any exposure (either direct or indirect) to crypto assets. Thus retail investors wanting crypto exposure in Ireland need to turn to VASPs/Exchanges direct.

Through Fintech Ireland, CompliReg and the industry experts network, we know the lawyers, ManCos and depositories / custodians who can assist institutional/professional firms and funds promoters looking to gain exposure to the crypto markets.  Further, if you are seeking a registration as a virtual service asset provider or authorisation as a MiFID, emoney institution or payments institution to provide services to  institutional, professional and retail clients, check out our Authorisation Page.


Further reading:

• ID1145 - Central Bank of Ireland 44th Edition (20 December 2021) of the Central Bank AIFMD Q&A

​Question. Can a RIAIF or a QIAIF invest either directly or indirectly in crypto-assets?

Answer. Crypto-assets are generally considered to be private digital assets that depend primarily on cryptography and distributed ledger or similar technology. However, the nature and characteristics of crypto-assets vary considerably. For example, crypto-assets that are tokenised traditional assets (whose value is linked to an underlying traditional asset or a pool of traditional assets (such as financial instruments or commodities)) may have a different risk profile when compared to other crypto-assets that are based on an intangible or non-traditional underlying. For the purposes of this Q&A “crypto-asset” is used to refer to the latter type of crypto-asset. The Central Bank must be satisfied that direct or indirect exposure to crypto-assets is capable of being appropriately risk managed. As of the date of publication of this Q&A, the Central Bank has not seen information which would satisfy it that direct or indirect exposure to crypto-assets is capable of being appropriately risk managed. Though crypto-assets do not all have uniform characteristics, the Central Bank has noted that they can present significant risks, including liquidity risk; credit risk; market risk; operational risk (including fraud and cyber risks); money laundering / terrorist financing risk; and legal and reputation risks. Taking into account the specific risks attached to crypto-assets and the potential that retail investors will not be able to appropriately assess the risks of making an investment in a fund which gives such exposures, the Central Bank is highly unlikely to approve a RIAIF proposing any exposure (either direct or indirect) to crypto assets. In the case of a QIAIF seeking to gain exposure to crypto-assets, the relevant QIAIF would need to make a submission to the Central Bank outlining how the risks associated with such exposures could be managed effectively by the AIFM. The Central Bank’s approach in relation to crypto-assets will be kept under review, continue to be informed by European regulatory discussions on the topic and may change should new information or developments emerge in the future. 
​

• ​​ID 1100  - Central Bank of Ireland 36th edition (20 December 2021) of the Central Bank UCITS Q&A

​Question.  Can a UCITS invest either directly or indirectly in crypto-assets?

Answer. Crypto-assets are generally considered to be private digital assets that depend primarily on cryptography and distributed ledger or similar technology. However, the nature and characteristics of crypto-assets vary considerably. For example, crypto-assets that are tokenised traditional assets (whose value is linked to an underlying traditional asset or a pool of traditional assets (such as financial instruments or commodities)) may have a different risk profile when compared to other crypto-assets that are based on an intangible or non-traditional underlying. For the purposes of this Q&A “crypto-asset” is used to refer to the latter type of crypto-asset. The Central Bank must be satisfied that assets in which a UCITS invests are capable of meeting the eligible asset criteria for UCITS and that indirect exposure to the assets is capable of being appropriately risk managed. As of the date of publication of this Q&A, the Central Bank has not seen information which would satisfy it that crypto-assets are capable of meeting the eligible asset criteria for UCITS or that indirect exposure to crypto-assets is capable of being appropriately risk managed. Though crypto-assets do not all have uniform characteristics, the Central Bank has noted that they can present significant risks, including liquidity risk; credit risk; market risk; operational risk (including fraud and cyber risks); money laundering / terrorist financing risk; and legal and reputation risks. Taking into account the specific risks attached to crypto-assets and the potential that retail investors will not be able to appropriately assess the risks of making an investment in a fund which gives such exposures, the Central Bank is highly unlikely to approve a UCITS proposing any exposure (either direct or indirect) to crypto assets. The Central Bank’s approach in relation to crypto-assets will be kept under review, continue to be informed by European regulatory discussions on the topic and may change should new information or developments emerge in the future. 

• Central Bank of Ireland Warning (22 March 2022)

The Central Bank again emphasised that crypto assets are highly risky and speculative, and may not be suitable for retail customers. In particular people need to be alert to the risks of misleading advertisements, particularly on social media, where influencers are being paid to advertise crypto assets.  The Central Bank has published a plain English explainer for consumers on cryptocurrencies.

• European Supervisory Authorities (EBA, ESMA and EIOPA Warning (17 March 2022)

The ESAs warned consumers that many crypto-assets are highly risky and speculative. The ESAs set out key steps consumers can take to ensure they make informed decisions.