Countless industries worldwide have been infected with the COVID-19 pandemic. It’s created destructive positions for some investors, with trading providers and brokerages have seen increased influx inactivity. One firm feeling a positive influx in Regtech, with financial analysts now questioning if this global pandemic prompted the increased trading activity.
Regtech is known for managing the regulation process of firms, ensuring that governing obligations are met. They’ve been assisting numerous brokerage exchanges throughout this pandemic to ensure compliance is met. That’s because these brokerages cannot comprehend the changing environment for blockchain and cryptocurrency assets. This extends to new regulations for governing entities, like the Financial Conduct Authority. They’ve implemented a “Relaxation Period”, which is enabling better executions and extending the deadlines on financial reports.
Automation is Key
Regtech isn’t an exclusive operator, with multiple businesses providing these services throughout the online cryptocurrency industry. Compliance companies have grown astronomically since January 2020, with various CEOs expressing their insight on the matter.
The Traction Fintech CEO, Quinn Perrott, stated to finance reporters: “During these times any service that has an automated and cost-effective nature is going to be of incredible value to most firms. Often smaller financial firms have significant key-man risk regarding compliance and regulatory reporting in general. The more they can outsource and automate, the less likely the risk of breaching a regulation as a result of a key staff member falling ill or redundancies.”
Ronen Kertis, the Cappitech CEO echoed those sentiments. He stated: “Automation is critical in situations like this where manual processes are difficult to keep up with when staff is working remotely, juggling work/home balance and the overall outbreak fear. Also, having control functions such as a dashboard to review reporting breaks easily helps firms identify when and where are their problems.”
Some believe weaknesses with working from home. Remarks on these issues were mentioned by Remona Kirketerp-Moller, the CEO of Muinmos. She stated: “At Muinmos we have seen a surge of demand for our mPASS regulatory compliance engine as compliance teams in financial institutions, like the majority of office-based employees, are being forced to work in a very different way from usual as a result of COVID-19.”
Remona finished her remarks by mentioning: “They no longer have a team based in the same office and are having to adapt fairly quickly to the realities of working from home, abandoning long-cherished paper-based routines and references. The situation has highlighted the need for enhanced online systems and has given rise to the need for secure cloud-based technology such as mPASS. Our Advisors, who are now also based at home, have been facing intense demand to onboard teams from financial institutions worldwide so that their compliance work can continue without interruption.”
An Increase on Demands
Technology for regulation compliance has grown since 2017. This began when the European Securities & Markets Authority implemented new regulations that tightened the overall blockchain market across Europe. Three years later and new challenges face the industry with COVID-19. It’s created a marketspace where 50% want an increase in regulation technologies for compliance purposes, with the additional 50% not wanting any changes to unfold.
Ronen Kertis spoke on the limitations surrounding these demands. He stated: “On one hand, a sales lifecycle will naturally be longer now with many firms unable to make decisions on new products. On the other hand, many firms have found out that there are major limitations to their current processes when working from home or with reduced staff. This has triggered conversations about available technology in the market.”
The Muinmos CEO believes the demand for regulation technologies have already increased, with investors and traders becoming more aware of automated onboarding. It allows for risks to become mitigated when regulatory changes are sustained. They act as safety nets for those wanting to comply with the regulation. COVID-19 unfolding worldwide has caused the demand to accelerate drastically.
New clientele and enquiries worldwide have prompted an uptick in demand. These remarks were mentioned by Quinn Perrot, the chief executive officer of Traction Fintech. He said: “Since most of the people are working from home now, they can save some time from their commute and invest it in addressing projects that have been on the back burner, such as improving their trade reporting process.”
The Challenges for Brokers
COVI-19 could’ve created new opportunities for brokerages, with operators like Muinmos having the potential to expand globally. Numerous obstacles face these companies before the process is completed.
Kirketerp-Moller expressed: “The pandemic has accelerated the need for Muinmos to expand our global offering, with an enhanced database covering more jurisdictions. This will enable us to provide additional support to financial institutions who are increasingly faced with a growing landscape of international clients and differentiated financial products that are subject to different rules in various jurisdictions.”
Quinn Perrott remarked similar sentiments. He mentioned: “Trade volumes have increased quite a bit with the volatility in late February and all through March 2020. Our London and Sydney offices have moved to Work from Home model, which so far has been seamless. A few global deadlines have been postponed, including the SFTR go-live date and RTS27 report publishing dates. It looks like EMIR refit and SI calculation dates will also be pushed back.”
COVID-19’s Lasting Impact
There’s been a boost to trading and the demand for regulation technologies with the COVID-19 pandemic. However, there have also been weaknesses highlighted, and it’s prompted multiple individuals to question if new changes to regulation will follow by summer 2020. There’s always the opportunity that global governments will approach cryptocurrency and blockchain markets with a favourable or positive outlook.
Ronen Kertis finished his sentiments to financial reporters by stating there’ll be immediate changes to regulation, with those most likely on the BCP. Business Continuity Planning will be required for brokerage safety. Those remarks expressed: “COVID-19 has revealed a lot of information of how BCPs are being implemented in real life. However, in Australia, it would be naive to think that ASIC would adopt a lenient approach toward compliance. For example, we note that recently AMP was fined by ASIC for non-compliance with its OTC derivatives trade reporting obligation.”
The Commissioner behind the Australian Securities & Investments Commission responded to Ronen Kertis. Cathie Armour mentioned: “The infringement notices issued to AMP Life and AMP Capital are a message to reporting entities to ensure compliance with their reporting and monitoring obligations under the ASIC Rules.’ Compliance is essential, economic downturn should not be an excuse for any non-compliance.”