The U.K. Jurisdiction Taskforce has published a consultation relating to its proposed Legal Statement offering guidance on the application of English insolvency law principles to digital assets. The proposed Legal Statement will cover a range of areas which are listed in an Annex to the paper. Respondents are invited to submit comments on these areas, which include: (i) whether digital assets would constitute "property" under English insolvency legislation; (ii) which jurisdictional rules apply to determine the location of digital assets; and (iii) whether any difficulties can be perceived in applying English insolvency legislation to the avoidance of prior transactions to pre-insolvency dealings with digital assets. In addition, respondents are encouraged to inform the UKJT of any material issues of concern to stakeholders in relation to the application of English insolvency law to digital assets, other than those listed in the paper's Annex. Responses should be submitted by December 4, 2023.

The consultation paper follows a series of other publications by the UKJT on legal issues surrounding digital assets, including its Statement on the Issuance and Transfer of Digital Securities under English Law, published in February 2023.

The European Securities and Markets Authority has opened a call for evidence on shortening the settlement cycle in the EU. The existing EU settlement cycle for trades in transferable securities executed on trading venues is by no later than the second business day after the trade takes place, known as T+2. Responses to the call for evidence may be submitted by December 15, 2023. ESMA will report to the European Commission during 2024, although an earlier report may be produced if ESMA considers that regulatory action is needed in response to the move to T+1 or T+0 in other jurisdictions.

ESMA is asking for feedback from financial market participants on the impact on their operations of a reduced securities settlement cycle to T+1 or T+0, what benefits and costs it would bring, and how and when a shorter settlement cycle could be achieved. ESMA considers that the EU landscape is more complex than that in other jurisdictions because there is no centralized EU post-trade financial markets infrastructure and no harmonized securities law. Finally, ESMA seeks input on the impact of developments in other jurisdictions, such as the intended move by the U.S. and Canada to T+1 in mid-2024 and the U.K.'s assessment of changing to T+1 or T+0, an initial report on which is expected by the end of this year (announced as part of the Edinburgh Reforms which are discussed in our client note, "UK Government Publishes Edinburgh Reforms for Financial Services").

HM Treasury has published a further policy statement on payment service contract termination rule changes, setting out its approach to implementation, timing and next steps. This latest policy statement follows the government's July policy statement in which it confirmed that it would bring forward legislation to enhance the requirements governing payment account terminations. This issue has become topical in light of the "de-banking" of higher risk or less profitable clients by several institutions and recent scandals in the U.K. involving account terminations of some politicians. The main changes being brought forward are:

• A requirement for payment account providers to provide clear and tailored explanatory reasons to an account user for the termination. The requirement would not apply where it would be unlawful to provide such information, for example, under U.K. financial crime and anti-money laundering legislation.
• A 90-day notice period before a payment account is terminated by a provider, subject to situations where there is a serious and uncorrected breach by the payment user of the terms applying to the account. It would also be clarified that reasons such as brand protection would not be sufficient justification for a shorter notice period.

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The U.K. Prudential Regulation Authority is consulting on a proposed rule and policy changes relating to the establishment and maintenance of third-country branches and subsidiaries within ring-fenced banking groups. The PRA's consultation comes out of HM Treasury's Smarter Ring-Fencing Regime consultation, in which it is proposing, among other things, to remove the ban on RFBs that prevents them from operating in or servicing customers outside the U.K. and European Economic Area. Responses to the PRA's consultation may be submitted until November 27, 2023.

The PRA is proposing to require an RFB to ensure that risks from its overseas subsidiary or branch are not material to its safety and soundness, including its ability to continue to provide core services in the U.K. and its resolvability. It also proposes to update its existing Supervisory Statement on RFBs to set out its proposed approach to assessing compliance with the new rule and determining whether there is a material risk to a RFB's stability.

HM Treasury has launched a consultation on proposed near term reforms to the U.K. ring-fencing regime—"A Smarter Ring-Fencing Regime"—and published its response to its call for evidence on the practicalities of aligning the ring-fencing and resolution regimes for banks. These potential changes to the four-year-old ring-fencing regime were announced in the government's Edinburgh Reforms, which we discuss in our client note: "UK Government Publishes Edinburgh Reforms for Financial Services."

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The Central Counterparties (Transitional Provision) (Extension and Amendment) Regulations 2023 were made on September 13, 2023 and will enter into force on November 1, 2023, extending the U.K.'s temporary recognition regime for third-country CCPs to December 31, 2025. The TRR allows third-country CCPs to continue offering clearing services in the U.K., pending full recognition or equivalence decisions being granted. The Financial Services and Markets Act 2023 (which we discuss in our client note, "A Boost for U.K. Financial Services") granted the Bank of England new rulemaking powers over CCPs and provides for the future framework for market access for overseas CCPs. The extended TRR will enable the current regime for overseas CCPs to continue while the U.K.'s new regime is developed, and ensures that certain overseas CCPs for whom recognition decisions have not yet been granted can continue to offer services in the U.K.

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The U.K. Financial Conduct Authority published a Policy Statement on 12 September 2023 setting out how it intends to implement the new regulatory gateway for financial promotions. The Financial Services and Markets Act 2023 (which we discuss in our client note, "A Boost for U.K. Financial Services") amends the Financial Promotion Restriction, banning authorized firms from approving financial promotions of unauthorized firms unless they have received approval from the FCA to have the prohibition removed in whole or part. The gateway will apply from February 7, 2024, with authorized firms able to apply to the FCA for permission from November 6, 2023 until February 6, 2024. There are exemptions from the gateway, entering into force on September 27, 2023, which permit the approval of financial promotions by authorized firms, for communication by unauthorized firms, in certain circumstances.

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The Joint Money Laundering Steering Group has published revisions to its Sector 22 Guidance on Cryptoasset exchange providers and custodian wallet providers along with a new Annex I, setting out guidance on the U.K. Travel Rule for cryptoassets. The Travel Rule was introduced under the Money Laundering and Terrorist Financing (Amendment) (No. 2) Regulations 2022, amending the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 and requires certain identification information on the sender and recipient to accompany a transfer of a cryptoasset. The Travel Rule requirements have applied since September 1, 2023.

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The U.K. Financial Conduct Authority has launched a review of the treatment by regulated financial services firms of Politically Exposed Persons based in the U.K. Firms are currently obliged, under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations, to conduct enhanced due diligence when dealing with PEPs. The FCA has existing Guidance on the treatment of PEPs for these purposes, which makes clear (amongst other things) that firms should adopt a proportionate and risk-based approach to the application of the MLRs. The FCA has been mandated to review this guidance under the Financial Services and Markets Act 2023, including an investigation into how firms are applying the guidance and consideration as to whether any amendments are needed. We discuss this mandate and the FSMA 2023 more generally in our client note, A Boost for UK Financial Services: The UK Financial Services and Markets Act 2023. 

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The Financial Services and Markets Act 2023 (Commencement No. 3) (Amendment) Regulations 2023 were made on August 25, 2023, postponing the revocation of the Collective Investment in Transferable Securities (Contractual Scheme) Regulations 2013.

The Commencement No. 3 Regulations amend the Financial Services and Markets Act 2023 (Commencement No. 1) Regulations 2023, which were made on July 10, 2023 and provide for the entry into force of certain provisions of the Financial Services and Markets Act 2023 (which we discuss in our client note, A Boost for UK Financial Services: The UK Financial Services and Markets Act 2023). This included provisions revoking retained EU legislation relating to financial services, including the CITS Regulations. The CITS Regulations establish a fund vehicle for the U.K. investment management industry which makes U.K. domiciled funds for collective investment in transferable securities more competitive. The CITS Regulations will now be revoked on a day appointed by the Treasury in a later instrument.

On September 7, 2023, the International Organisation of Securities Commissions launched a consultation on proposed policy recommendations on market integrity and investor protection issues in decentralized finance (DeFi). IOSCO is proposing that the final recommendations, which it aims to finalize before the end of 2023, will help IOSCO members to establish compliant markets. Responses to the consultation may be submitted until October 19, 2023.

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The U.K. Financial Conduct Authority announced on September 7, 2023, that firms may avail themselves of a delay to the application of some rules applying to cryptoasset financial promotions. The FCA published rules for cryptoasset financial promotions in June this year, which will apply from October 8, 2023 (the same date that the Financial Services and Markets Act 2000 (Financial Promotion) (Amendment) Order 2023 brings the promotion of cryptoassets within scope of the U.K. regulatory regime). The reprieve is available, on application, to:

• firms registered with the FCA under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 that intend to communicate cryptoasset financial promotions; and
• authorized firms that intend to communicate or approve cryptoasset financial promotions.

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The Financial Services and Markets Act 2000 (Exemptions from Financial Promotion General Requirement) Regulations 2023, which come into force on September 27, 2023, set out the exemptions to the new U.K. regulatory gateway for the approval by authorized firms of financial promotions of unauthorized firms. The Financial Services and Markets Act 2023 (which we discuss in our client note, "A Boost for U.K. Financial Services: The U.K. Financial Services and Markets Act 2023") amends the Financial Promotion Restriction, banning authorized firms from approving financial promotions of unauthorized firms unless they have received approval from the Financial Conduct Authority to have the prohibition removed in whole or part. The prohibition will apply from February 7, 2024, according to the Financial Services and Markets Act 2023 (Commencement No. 2 and Transitional Provisions) Regulations 2023, which also set out the following timeline for the new regime to come into effect:

• September 6, 2023: provisions will apply that enable the FCA to give directions and guidance and to make rules.
• November 6, 2023: provisions will apply that allow the FCA to receive (but not determine) applications to approve financial promotions that are made during the application period (November 6, 2023 to February 6, 2024).

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The Financial Services and Markets Act 2023 (Commencement No. 2 and Transitional Provisions) Regulations 2023, made on August 22, 2023, bring into force certain provisions of the Financial Services and Markets Act 2023 and create a number of transitional regimes. We discuss the FSM Act in our client note, "A Boost for U.K. Financial Services: The U.K. Financial Services and Markets Act 2023."

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The U.K. Joint Money Laundering Steering Group opened a consultation on July 28, 2023 on guidance on the U.K. travel rule for cryptoasset transfers. The Money Laundering and Terrorist Financing (Amendment) (No. 2) Regulations 2022 introduced the cryptoasset travel rule by amending the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, and firms will need to comply with the requirements from September 1, 2023. The travel rule requires certain identification information on the sender (originator) and recipient (beneficiary) to accompany a transfer of a cryptoasset. The JMLSG is proposing to add a new annex setting out guidance on the U.K. travel rule for cryptoassets, covering scope, information requirements, batch transfers, returns, unhosted wallet transfers, wallet attribution, linked transactions and use of a layer-2 solution such as the Lightning Network. The guidance also states that firms should consider communications from the Financial Conduct Authority on the sunrise issue, which refers to the impact of jurisdictions implementing the travel rule at different times. Firms may encounter issues when dealing with counterparties in jurisdictions that have not implemented the travel rule for cryptoassets, for example, when dealing with EU counterparties for which the EU travel rules for cryptoasset transfers will only apply from December 30, 2024. Responses to the JMLSG consultation may be submitted until August 25, 2023.

The Financial Stability Board has finalized its global regulatory framework for cryptoasset activities and markets and revised the framework for global stablecoin arrangements. Both frameworks, based on the principle of "same activity, same risk, same regulation" aim to provide a basis for consistent regulation across the globe that is proportionate to the risks.

Comprising nine high-level recommendations for the regulation, supervision and oversight of cryptoasset activities and markets, the cryptoasset framework sets out the key objectives for implementation of an effective regulatory and supervisory regime for mitigating the risks posed by cryptoassets. The recommendations are:

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HM Treasury has published a response to its consultation on payments regulation and the systemic perimeter. The consultation was prompted by the U.K. government's Payments Landscape Review and HM Treasury's concern that some payments services operators were not subject to systemic supervision but may pose systemic risks to the U.K. financial system.

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The U.K. Financial Conduct Authority is consulting on its proposed rules for securitization markets, which will replace many of the firm-facing requirements under the existing U.K. Securitization Regulation. The U.K. Prudential Regulation Authority is separately consulting on its own equivalent rules for PRA-authorized firms, which together with the FCA's rules will create a coherent regime for securitizations. The regulators are being handed the power to make these rules under HM Treasury's proposed reforms to the U.K. securitization regime, which will repeal the existing U.K. Securitization Regulation, keeping part of the regime in new legislation and the remainder in the regulators' rulebooks.

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HM Treasury has published a consultation on the establishment of a financial market infrastructure sandbox, known as the Digital Securities Sandbox. The sandbox will be established using new powers granted by the U.K. Financial Services and Markets Act 2023 (which we discuss in our client note, "A Boost for UK Financial Services"), empowering HM Treasury to set up individual FMI sandboxes. The sandboxes are designed to enhance understanding of the use cases for emerging digital asset technologies, including distributed ledger technology. HM Treasury can modify or disapply legislation and rules within the sandbox to permit different technologies to be tested that would not be possible under the existing legislative and regulatory framework, with the potential to make permanent changes to legislation based on the findings of the sandbox.

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HM Treasury has published a response to its consultation on the future of U.K. retail disclosures. HM Treasury's consultation (which we discussed in our client note, "UK Government Publishes Edinburgh Reforms for Financial Services") identified various problems with the Packaged Retail and Insurance-Based Investment Products Regulation which currently governs disclosures for complex retail investment products. These included that the PRIIPs regime could be overly prescriptive and potentially misleading in its attempts to make PRIIPs products comparable and that the rules were spread across a mixture of legislation and regulatory rules which led to a complex environment for firms.

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The U.K. Financial Conduct Authority, Prudential Regulation Authority and Bank of England have jointly published their revised Complaints Scheme, which governs how complaints against the U.K. regulators should be made and handled. The changes include:

• The introduction of specific discretionary compensation bands for non-financial loss arising from the regulators' actions or inactions. The bands range from £100 for a relatively low level of stress or inconvenience, up to over £2,500 in exceptional circumstances, for example, where the consequences of the regulators' failings are particularly severe.

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HM Treasury has published a Call for Input on the U.K. Future of Payments Review, an investigation into how future payments are likely to be made and how the U.K. can offer world-leading retail payments. The review is focused on consumer needs — specifically, those of individuals and businesses processing retail payments. Input is sought on the following issues:

1. What are the most important consumer retail payment journeys, both today and in the next five years?
2. How does the experience of these journeys by U.K. consumers (individuals and businesses) compare with those of other leading countries?
3. How likely are the existing plans and initiatives across the payments landscape to deliver world-leading payment journeys for U.K. consumers?

The Call for Input is open until September 1, 2023.

HM Treasury has published a near-final draft statutory instrument and related Policy Note setting out its proposed reforms to the U.K. securitization regime. Comments on the draft S.I. can be submitted until August 21, 2023. The final S.I. will be laid before Parliament before the end of 2023.

The PRA is separately consulting on proposed rules to replace its retained EU law securitization requirements for PRA-authorized firms. Responses to the PRA's consultation should be submitted by October 30, 2023. The FCA will publish a consultation on its securitization rules on August 7, 2023.

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The U.K. Financial Conduct Authority has issued final guidance to clarify the scope of the regulatory perimeter for trading venues and the regulatory approvals needed to conduct their business. The guidance caters for new platforms emerging from technological developments. The guidance is one of the outcomes of HM Treasury's Wholesale Markets Review (which we discuss in our client note, "UK Wholesale Markets Review"). Other aspects of the Review are being implemented through the Financial Services and Markets Act 2023 (which we discuss in our client note, "A Boost for U.K. Financial Services: The U.K. Financial Services and Markets Act 2023") or by amendments to FCA rules.

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The U.K. Financial Conduct Authority has published a statement setting out how its work to support the 'key drivers' of productivity will facilitate delivery of its new secondary objective and how it intends to report on progress embedding the new objective. The Financial Services and Markets Act 2023 (which we discuss in our client note, "A Boost for U.K. Financial Services: The U.K. Financial Services and Markets Act 2023") introduces a new secondary statutory objective, obliging the FCA and U.K. Prudential Regulation Authority in carrying out their functions to support the long-term growth and international competitiveness of the U.K.'s economy in the medium and long term. This obligation enters into force on August 29, 2023, under Commencement Regulations made on July 10, 2023. Each regulator must report at two intervals to HM Treasury setting out how it has complied with its duty to advance the new objective. The reports are due 12 and 24 months after the new objective applies (August 29, 2024 and August 29, 2025 respectively).

The Financial Services and Markets Act 2023 (Commencement No. 1) Regulations 2023 were made on July 10, 2023 and will bring into force provisions under the Financial Services and Markets Act 2023 (which we discuss in our client note, "A Boost for U.K. Financial Services: The U.K. Financial Services and Markets Act 2023") from either July 11, 2023, August 29, 2023 or January 1, 2024.

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On July 5, 2023, the U.K. Financial Conduct Authority launched a consultation on a proposed U.K. consolidated tape for bonds. MiFID II introduced requirements for a "consolidated tape" for transactions in equity and non-equity instruments. It requires a consolidated tape provider to collect post-trade information published by trading venues and approved publication arrangements and to consolidate this into a continuous live data stream made available to the public. No consolidated tape has yet been set up in either the U.K. or the EU. The EU announced at the end of June 2023 that political agreement had been reached on the proposals to introduce an EU consolidated tape.

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Following finalization of the Financial Services and Markets Act 2023 (which we discuss in our client note, "A Boost for U.K. Financial Services: The U.K. Financial Services and Markets Act 2023"), HM Treasury published a Delivery Plan for the Building a Smarter Financial Services Regulatory Framework for the UK. The Delivery Plan compliments the Policy Paper published as part of the Edinburgh Reforms (discussed in our client note, "UK Government Publishes Edinburgh Reforms for Financial Services").

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The report and recommendations of the UK Investment Research Review were published on July 10, 2023. The recommendations have been accepted by the government and the Financial Conduct Authority has committed to prioritizing consulting on proposed rule changes with a view to revised rules applying in H1 2024.

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The U.K. Prudential Regulation Authority opened a consultation on June 30, 2023, on its proposed approach to reviewing its rules, including a proposed statement of policy. The Financial Services and Markets Act 2023 transfers responsibility for making detailed rules to the U.K.'s regulators, significantly increasing their powers, and provides for an enhanced regulatory accountability framework, subjecting the regulators to additional oversight by Parliament and HM Treasury. One of those regulatory accountability measures requires the PRA and Financial Conduct Authority to keep their rules under review and to publish a statement of policy on how they conduct such reviews.

The PRA's consultation sets out its proposed framework for conducting rule reviews, stakeholder engagements, transparency and communicating the outcomes of reviews. Responses to the consultation may be submitted until September 29, 2023.

The FCA has also published a draft Rule Review Framework, for which feedback may be submitted until September 15, 2023.

The U.K. Financial Conduct Authority launched a consultation on July 14, 2023, on its proposed Rule Review Framework. The Financial Services and Markets Act 2023 transfers responsibility for making detailed rules to the U.K.'s regulators, significantly increasing their powers. To ensure proper oversight of the use of those powers in practice, the FSM Act provides for an enhanced regulatory accountability framework, subjecting the regulators to additional oversight by Parliament and HM Treasury. Among other things, the FCA and Prudential Regulation Authority must keep their rules under review and publish a statement of policy on how they conduct such reviews.

The FCA is proposing a draft Rule Review Framework based on the use of data to assess the effects of a rule change. The draft Framework sets out three types of review that the FCA could conduct, describing their purpose. The three types of review are an evidence assessment, a post-implementation review and an ex post impact evaluation. The FCA's draft Framework also describes the steps it could take if the data shows that a rule is not working as had been intended. Comments on the FCA's draft Rule Review Framework may be submitted until September 15, 2023.

The PRA is also consulting on its proposed approach to reviewing its rules, including a proposed statement of policy. Responses to the PRA's consultation may be submitted until September 29, 2023.

HM Treasury has published its response to the Short Selling Regulation Review, which sought views on the proposed U.K. short selling regime. Once the new U.K. regime for short selling is finalized, the retained EU Short Selling Regulation will be revoked under the revocation framework established by the U.K. Financial Services and Markets Act 2023 (which we discuss in our client note, "A Boost for U.K. Financial Services: The U.K. Financial Services and Markets Act 2023"). A draft statutory instrument for the new U.K. regime is expected to be published before the end of 2023, with the final S.I. being delivered during the course of 2024. The U.K. Financial Conduct Authority will also consult on proposed rules for the new framework in 2024.
 
The proposed regime is intended to represent a "lighter-touch" approach that will facilitate short selling and its benefits while managing the associated risks. The changes will: (i) increase the net short position disclosure threshold from 0.1% to 0.2%; (ii) replace the current requirement to disclose all short positions over 0.5% with a new disclosures model, whereby the FCA will publish aggregated short positions in each company's shares (removing the need to reveal the identity of individual sellers); and (iii) empower the FCA to make rules on areas such as exempt share arrangements, the market maker exemption requirements and prohibitions on uncovered short selling.

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Following rigorous debate in Parliament, the U.K.'s latest Financial Services and Markets Act (FSM Act) received royal assent on June 29, 2023. The FSM Act significantly changes the U.K.'s regulatory framework for financial services, implementing the government's post-Brexit Future Regulatory Framework Review and the Edinburgh Reforms. The existing regulatory model under the Financial Services and Markets Act 2000 has been enhanced with the introduction of a new "Designated Activities Regime" for the regulation of activities related to the financial markets, transfer to the U.K. regulators of responsibility for making and reviewing detailed firm rules, subject to enhanced oversight by Parliament and HM Treasury, and the establishment of a regulatory framework for oversight of third parties that provide critical services to financial institutions.

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HM Treasury has published a near-final draft statutory instrument and related Policy Note setting out its proposed reforms to the U.K. prospectus regime. The U.K. Financial Conduct Authority has also published a series of six Engagement Papers seeking views on its proposed rules under the new regime.

Once the new U.K. regime is finalized, the retained EU Prospectus Regulation will be repealed under the revocation framework established by the U.K. Financial Services and Markets Act 2023 (which we discuss in our client note, "A Boost for U.K. Financial Services: The U.K. Financial Services and Markets Act 2023").

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On June 27, 2023, the EU and U.K. signed a Memorandum of Understanding on Financial Services Cooperation, a high-level agreement on future cooperation in the regulation of financial services. The MoU provides for:

• exchange of views between the EU and U.K. on regulatory developments and other issues of common interest;
• transparency and communication in adopting, suspending and withdrawing equivalence decisions;
• exchange of views between the EU and U.K. on market developments and financial stability; and
• enhanced cooperation and coordination, including in international bodies.

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The EU published a new Sustainable finance package 2023 on June 13, 2023. The package includes:

• A Proposed Regulation on the transparency and integrity of ESG rating activities, which aims to enhance the quality of ESG ratings. The Regulation will introduce an authorization and ongoing supervision regime for ESG rating providers along with certain obligations, e.g., disclosures on ratings methodologies. The proposal does not intend to harmonize the methodologies for the calculation of ESG ratings, but to increase their transparency. Third-country ESG rating providers may be able to offer their services in the EU under either equivalence, endorsement or recognition. The U.K. is currently consulting on making the provision of ESG ratings a regulated activity.

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The Law Commission, a U.K. body which makes suggestions for legislative reform, has published a final report in response to its July 2022 consultation on potential digital asset law reforms.

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On June 7, 2023, the U.K. government published a statutory instrument (the Financial Services and Markets Act 2000 (Financial Promotion) (Amendment) Order 2023 (FP (Amendment) Order) and related explanatory memorandum) amending the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (FPO). The amendments broadly reflect HM Treasury's final proposals on cryptoasset financial promotions, published in January 2022. The expanded financial promotions regime will apply from October 8, 2023, an implementation period of four months as opposed to the originally proposed six, given recent market volatility. The new regime will capture promotions for "qualifying cryptoassets" with respect to the following (existing) controlled activities:

• dealing in securities and contractually based investments;
• arranging deals in investments;
• managing investments;
• advising on investments; and
• agreeing to carry on any of the above activities.

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On June 8, 2023, the U.K. Financial Conduct Authority published its final Policy Statement setting out detailed rules for the U.K.'s cryptoasset financial promotions regime. The Policy Statement follows the publication on June 7, 2023 of the Financial Services and Markets Act 2000 (Financial Promotion) (Amendment) Order 2023 (FP (Amendment) Order), which will bring the promotion of certain cryptoasset activities within the U.K.'s financial promotions regime. The FCA's rules will apply from October 8, 2023 (the same date that cryptoassets are brought within the financial promotions regime under the FP (Amendment) Order).

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On May 23, 2023, the International Organisation of Securities Commissions launched a consultation on proposed policy recommendations for crypto and digital asset markets. IOSCO is proposing that the final recommendations, which it expects to publish in Q4 2023, will help IOSCO members to apply the IOSCO Objectives and Principles for Securities Regulation to crypto asset activities. Responses to the consultation may be submitted until July 31, 2023.

IOSCO is proposing 18 recommendations that cut across the following areas:

• Conflicts of interest arising from vertical integration of activities and functions.
• Market manipulation, insider trading and fraud.
• Cross-border risks and regulatory cooperation.
• Custody and client asset protection.
• Operational and technological risk.
• Retail access, suitability and distribution.

The proposed recommendations do not cover decentralized finance activities, products or services. IOSCO will consult on recommendations for DeFi activities later this year.

On May 24, 2023, the European Commission published a Retail Investment Strategy package aimed at enhancing retail investor protections across the EU and encouraging participation in the EU capital markets. The package comprises an amending Directive, which makes changes across a range of EU legislation, and an amending Regulation, which revises the EU's Packaged Retail and Insurance-based Investment Products Regulation.

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On May 18, 2023, the International Institute for the Unification of Private Law (UNIDROIT), the intergovernmental organization for modernizing and coordinating private law, published a set of draft Principles on Digital Assets and Private Law. The 19 Principles provide high-level guidelines with which States (including UNIDROIT Member States) would be encouraged to align their own legislation on digital assets. The U.K., U.S. and EU Member States are among the members of UNIDROIT. The Principles have been designed to be neutral as to jurisdiction, technology and their manner of implementation, making them flexible and easy to incorporate into national legal systems. If the draft Principles are accepted by UNIDROIT's Governing Council, they are expected to be finalized and published in 2023.

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On May 25, 2023, the final Insider Dealing (Securities and Regulated Markets) Order 2023 and its related explanatory memorandum were published. The Order will enter into force on June 15, 2023.

The legislation aligns the scope of trading venues covered by the U.K.'s criminal insider dealing regime under the Criminal Justice Act 1993 with the civil regime under the U.K.'s Market Abuse Regulation, and updates the criminal regime. Details of the amendments are discussed in our separate blog.

The Financial Services and Markets Act 2000 (Commodity Derivatives and Emission Allowances) Order 2023 was made on May 17, 2023. The Order, which enters into force on January 1, 2025, paves the way for the Financial Conduct Authority to develop a simpler test for determining which firms need to be authorized as investment firms as a result of their commodities and emission allowances trading business, known as the "ancillary activities test". The final Order is substantively the same as the draft SI, which we discuss in our related blog: "UK Government Publishes Draft Legislation Revising Application of The Ancillary Activities Test for Commodity Derivatives and Emission Allowances".

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On May 9, 2023, the U.K. government published a Call for Proposals on which metrics the Financial Conduct Authority and the Prudential Regulation Authority should be required to publish for the new secondary growth and competitiveness objectives. The new secondary objectives, which will be brought in under the Financial Services and Markets Bill, will compel the FCA and PRA in carrying out their functions to support long-term growth and international competitiveness. For the PRA, the new growth and international competitiveness objective will operate in conjunction with its existing secondary objective to facilitate effective competition in the markets for services provided by PRA-authorized firms (banks, large investment firms, insurers and credit unions). For the FCA, the new objective will go together with the FCA's three existing operational objectives of consumer protection, market integrity and competition.

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On April 20, 2023, the draft Insider Dealing (Securities and Regulated Markets) Order 2023 was published (the draft Order). The draft Order will generally align the scope of the U.K.'s criminal insider dealing regime under the Criminal Justice Act 1993 with that of the civil regime under the U.K.'s Market Abuse Regulation and update the criminal regime. The draft Order, which will come into effect 21 days after it is made, will revoke the outdated Insider Dealing (Securities and Regulated Markets) Order 1994 (the 1994 Order).

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On May 3, 2023, the U.K. Financial Conduct Authority published a Policy Statement on Improving Equity Secondary Markets, following its consultation last year. These changes are part of the response to the Wholesale Markets Review led by HM Treasury. Some of the changes from the WMR require legislative changes and are being progressed in the Financial Services and Markets Bill. We discuss these changes, and others proposed by the Bill in our client note, "UK Financial Services and Markets Bill". The changes that the FCA is bringing in do not require legislation or new powers for the FCA. The FCA confirms that it will consult this year and next on further reforms to the requirements for equity markets once the detailed firm-facing obligations are transferred to its Handbook.

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On April 28, 2023, the Pension Fund Clearing Obligation Exemption and Intragroup Transaction Transitional Clearing and Risk-Management Obligation Exemptions (Extension and Amendment) Regulations 2023 were published, with an explanatory memorandum. These Regulations come into effect on June 12, 2023, and will extend the expiry date of the:

• Exemption from the clearing obligation for pension schemes from June 18, 2023, to June 18, 2025. This means that U.K. and EEA pension funds will remain exempt from the U.K. clearing obligation. This change is made by amending U.K. EMIR, as provided for in the Over the Counter Derivatives, Central Counterparties and Trade Repositories (Amendment, etc., and Transitional Provision) (EU Exit) (No. 2) Regulations 2019.
• Temporary intragroup exemption provisions from December 31, 2023, to December 31, 2026. This means that the U.K. clearing obligation and risk mitigation measures will not apply to OTC derivative contracts between U.K. firms and their overseas group entities.

This is the first time that HM Treasury has used its powers to extend these dates.

On April 20, 2023, the agreed text of the proposed European Markets in Crypto-Assets Regulation was given final approval by the European Parliament. The Regulation is intended to improve legal certainty in the regulatory treatment of crypto-assets, to preserve consumer protection and market integrity in crypto-asset markets and to ensure financial stability. The text must now be formally endorsed by the Council of the European Union and will then be published in the Official Journal of the European Union. It will enter into force 20 days after publication. The majority of the Regulation is expected to apply from around January 2025, with the exception of the provisions regarding asset-referenced token issuers and e-money token issuers, which should apply from around July 2024.

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On April 20, 2023, the European Parliament announced that it had formally endorsed the draft Regulation on information accompanying transfers of funds and crypto assets (referred to here as the EU Travel Rule Regulation). The draft Markets in Crypto-Assets (MiCA) Regulation has also been adopted.

The existing EU Wire Transfer Regulation (EU WTR) requires EU Payment Service Provider to ensure that information on the payer and the payee accompanies a transfer of funds. The funds can be in any currency, and comprise banknotes and coins, scriptural money and electronic money.

The EU Travel Rule Regulation will extend the requirements to crypto assets and crypto-asset services providers (CASPs), (both as defined under the draft MiCA Regulation) with information on the originator and the beneficiary being required to accompany any transfers in crypto assets, regardless of whether they are domestic or cross-border. The requirements will not apply to person-to-person transfers of crypto assets where a CASP is not involved, or when both the originator and the beneficiary are providers of crypto-asset transfers acting on their own behalf.

The EU Travel Rule Regulation must still be published in the Official Journal of the European Union before it comes into effect. This is likely to be around July this year. At that time, the EU Travel Rule Regulation will repeal the EU WTR, however, the existing requirements on information accompanying transfers of funds will carry over to the new Regulation. The EU Travel Rule Regulation will apply from the same date that the MiCA Regulation applies, which is expected to be January 2025.