PART B – REGULATORY APPROACH

3. Overview and Scope of Activities

3.1 The proposed Framework is being developed by the AFSA as part of its plan to enhance regulatory policies aimed at facilitating the adoption of technological innovations in the AIFC.

3.2 In formulating the proposed Framework, it has been proposed to:

1. 3.2.1 develop a standalone regulatory framework for digital-only banks (please see Sections 5 to 8 below with respect to "Authorised Digital Banks" and "Authorised Digital Banks (Limited Licence)");
2. 3.2.2 offer a phased approach to full authorisation for digital-only banks to encourage new providers into the AIFC (i.e., to lower the barriers to entry into the banking market) (please see Section 8 below with respect to "Authorised Digital Banks (Limited Licence)");
3. 3.2.3 consider ways to access online banking;
4. 3.2.4 define new Regulated Services to permit 'Open Banking' activities;
5. 3.2.5 consider what additional infrastructure may need to be developed so that 'Open Banking' can operate fully; and
6. 3.2.6 put in place suitable safeguards that recognise and address the security and other challenges posed by digital banking.

3.3 Following various policy discussions, it has been decided to include provisions related to "Open Banking" in the separate Payment Services and Electronic Money Framework ("PSEM Framework").

4. Legislation

4.1 When developing the proposed digital banking framework, the starting point will be to review the existing AIFC Acts which apply to Banks generally. When conducting this review, the question in each case will be: should this rule apply to an Authorised Digital Bank and, if so, does the rule need to be modified in any way in respect of its application to Authorised Digital Banks. The acts to be reviewed are:

1. 4.1.1 AIFC Financial Services Framework Regulations (“FSFR”);
2. 4.1.2 AIFC General Rules (“GEN”);
3. 4.1.3 AIFC Conduct of Business (“COB”);
4. 4.1.4 AIFC Banking Business Prudential Rules ("BBR");
5. 4.1.5 AIFC Market Rules ("MAR");
6. 4.1.6 AIFC Anti-Money Laundering, Counter – Terrorist Financing and Sanctions Rules (“AML”);
7. 4.1.7 AIFC Fees Rules ("FEES"); and
8. 4.1.8 AIFC Glossary.

4.2 New rules for digital-only banks will also be drafted - the new AIFC Digital Bank Rules ("DBR").