FCA and Japanese regulator to support fintech firms

"It's positive to see the UK regulator taking active steps to promote cross border activity for international fintech firms and an exchange of letters with the Japanese regulator is a strategically clever move."

The exchange of letters between the JFSA and the FCA will provide a regulatory referral system for fintech firms from Japan and the UK seeking to enter the other’s market, reducing regulatory uncertainty and time to market.

In addition, the Exchange of Letters encourages the regulators to share information about financial services innovation in their respective markets, reduce barriers to entry in a new jurisdiction and further encourage innovation in both countries.

For Japan, this Exchange of Letters will encourage Japanese startup companies to engage with innovative financial businesses globally and aims to attract UK companies to the Japanese market.

The FCA says the Exchange of Letters will "provide invaluable knowledge" to UK firms hoping to enter the Japanese market and assist non-UK innovators interested in entering the market the FCA oversees.

Shunsuke Shirakawa, the Vice Commissioner for International Affairs at the JFSA, said: “We are delighted to establish this Co-operation Framework with the FCA. This is our first case in creating a pro-FinTech Co-operation Framework with any other countries. UK is one of the world-leading FinTech countries, generating £6.6 billion in revenue. We believe that this Exchange of Letters strengthens the relationship between the JFSA and the FCA and promotes innovation in our respective markets.”

Christopher Woolard, Executive Director of Strategy and Competition at the FCA, added: “We are committed to encouraging innovation that has the potential to be of benefit to consumers using financial services here in the UK. Today’s Exchange of Letters with the JFSA will help break down barriers to entry both in Japan and in the UK for firms with interesting new business services and products."

Jake Green, regulation partner at law firm Ashurst, commented: "It's positive to see the UK regulator taking active steps to promote cross border activity for international fintech firms and an exchange of letters with the Japanese regulator is a strategically clever move. It's a shame, however, that the UK did not go further and, for example, offer to 'fastpass' Japanese authorised fintech businesses in the UK authorisation queue. But then with MiFID II and Benchmarks Regulation coming into effect at the beginning on 2018, the FCA authorisations team may not be able to deal with further administrative burdens.

"The exchange of letters is a clear pleasantry and is obviously trying to cement the strategic relationship between the two regulators and the two important markets. But the FCA does not offer much more than what would already be offered to an overseas firm that is considering doing business in the UK anyway. In this way, there is a bit of a missed opportunity."