The following posts provide a snapshot of selected UK, EU and global financial regulatory developments of interest to banks, investment firms, broker-dealers, market infrastructures, asset managers and corporates.
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ESMA guidelines on suitability requirements and format of the periodic statement for portfolio management activities under MiCAR
26 March 2025
Official translations of the guidelines on certain aspects of the suitability requirements and format of the periodic statement for portfolio management activities under the EU Markets in Crypto Assets Regulation (MiCAR) have been published on the European Securities and Market Authority's (ESMA's) website. These guidelines apply to competent authorities and cryptoasset service providers (CASPs) where they provide advice on cryptoassets or portfolio management of cryptoassets. They specify the suitability requirements under Article 81(1), (7), (8), (10), (11) and (12) of MiCAR and the requirements applicable to the format of the periodic statement to be provided by CASPs in accordance with Article 81(14) of MiCAR. The guidelines apply from 25 May. Competent authorities must notify ESMA by 25 May whether they (i) comply, (ii) do not comply, but intend to comply, or (iii) do not comply and do not intend to comply with the guidelines, with their reasons for not complying. Financial market participants are not required to report whether they comply with these guidelines.Topic : FinTech -
Suite of regulatory technical standards supplementing MiCAR published in OJ
24 March 2025
Four Commission Delegated Regulations supplementing Regulation 2023/1114 (MiCAR) have been published in the Official Journal of the EU, namely:- Commission Delegated Regulation - 2025/415 supplementing the EU Markets in Crypto Assets Regulation (MiCAR) with regard to regulatory technical standards specifying adjustment of own funds requirement and minimum features of stress-testing programmes of issuers of asset-referenced tokens or of e-money tokens.
- Commission Delegated Regulation - 2025/418 supplementing MiCAR with regard to regulatory technical standards specifying the minimum content of the governance arrangements on the remuneration policy of issuers of significant asset-referenced or e-money tokens.
- Commission Delegated Regulation - 2025/419 supplementing MiCAR with regard to regulatory technical standards specifying the procedure and timeframe for an issuer of asset-referenced tokens or of e-money tokens to adjust the amount of its own funds.
- Commission Delegated Regulation - 2025/421 supplementing MiCAR with regard to regulatory technical standards specifying the data necessary for the classification of crypto-asset white papers and the practical arrangements to ensure that such data is machine-readable.
Each of these delegated regulations will enter into force on 13 April.Topic : FinTech -
ESMA guidelines on the conditions and criteria for the qualification of cryptoassets as financial instruments
19 March 2025
The European Securities and Markets Authority (ESMA) has published official translations of its guidelines on the conditions and criteria for the qualification of cryptoassets as financial instruments under Article 2(5) of the Markets in Cryptoassets Regulation (MiCAR). The guidelines will now apply from 18 May to competent authorities and financial market participants including issuers, offerors, cryptoasset service providers, investors and all persons engaging in activities relating to cryptoassets. National competent authorities must notify ESMA whether they comply, do not comply but intend to comply, or do not intend to comply with the joint guidelines by 18 May. Financial market participants are not required to report whether they comply.Topic : FinTech -
Preliminary market engagement exercise for the UK digital gilt instrument pilot
18 March 2025
The UK Chancellor of the Exchequer has announced details of the launch of the procurement process for the pilot digital gilt instrument (DIGIT) issuance. The pilot aims to: (i) enable the government to explore how distributed ledger technology (DLT) can be applied across the lifecycle of the UK sovereign debt issuance process; and (ii) catalyse the development of UK based DLT infrastructure and the adoption of DLT in UK financial markets. It is expected that:- DIGIT will be issued on a platform within the Digital Securities Sandbox (DSS), and suppliers will need to obtain any necessary permissions from the Bank of England and the FCA to operate in the DSS before they will be eligible for selection under the associated procurement.
- Given that the use of 'unbacked cryptocurrencies' or stablecoins are not within the scope of the DSS, these solutions will not be available for the purposes of the payment leg of any DIGIT transaction.
Read more.Topic : FinTech -
EU MiCAR regulatory technical standards on order book records and transparency data requirements for CASPs
14 March 2025
The following two delegated regulations made under Article 76(16) of Markets in Cryptoassets Regulation (MiCAR) have been published in the Official Journal of the European Union:- Commission Delegated Regulation (EU) 2025/416 of 29 November 2024 on regulatory technical standards (RTS) specifying the content and format of order book records for cryptoasset service providers (CASPs) operating a trading platform for cryptoassets. The RTS set out in Articles 2 to 15 the details of each order in cryptoassets advertised through a CASP's systems the relevant CASP is required to keep at the disposal of the competent authority, or give the competent authority access to, in the format laid down in Tables 2 and 3 of the Annex.
- Commission Delegated Regulation (EU) 2025/417 of 28 November 2024 supplementing MiCAR with regard to RTS specifying the manner in which CASPs operating a trading platform for cryptoassets are to present transparency data. The RTS specify the general principles of presentation of the information on operating rules for trading platforms, pre- and post-trade transparency requirements, real time publication of transactions, and disaggregation of pre- and post-trade data requirements.
Both delegated regulations will enter into force on 3 April.Topic : FinTech -
ESMA publishes overview of planned consultations for 2025
13 March 2025
The European Securities and Markets Authority has published an overview of its planned consultations for 2025. The consultations relate to workstreams under the EU Listing Act, the Markets in Financial Instruments package, the latest European Market Infrastructure Regulation (known as EMIR 3), the review of the Alternative Investment Fund Managers Directive, sustainable finance and investor protection. ESMA states that it will update the list regularly. -
ESAs publish guidelines on the standardised test for crypto-assets and templates for explanations and opinions under MiCAR
10 March 2025
The European Supervisory Authorities (ESAs) have published guidelines on: (i) a common approach for the regulatory classification of crypto-assets under the Markets in Crypto-asset Regulation (MiCAR); and (ii) templates for certain explanations and opinions required under MiCAR under Arts 8(4), 17(b)(ii) and 18(2)(e). The explanations and opinions relate to whether, or why, a crypto-asset or asset-referenced token should not be considered to be, either, an e-money token, a crypto-asset excluded from the scope of MiCAR or (in the case of crypto-assets) an asset-referenced token.
The guidelines apply from 12 May and national regulators, financial market participants and financial institutions must make every effort to comply with them. Within two months of publication of the guidelines on the ESAs' websites in all official languages, national regulators should inform the ESAs whether they comply or intend to comply, or otherwise their reasons for non-compliance.Topic : FinTech -
EC adopts Delegated Regulations on RTS under MiCAR
27 February 2025
The European Commission has adopted a number of Commission Delegated Regulations supplementing the Markets in Crypto-Assets Regulation (MiCAR):- Commission Delegated Regulation (C(2025)1206) adopted in accordance with Article 68(10) of MiCAR prescribes the regulatory technical standards (RTS) specifying records to be kept of all cryptoasset services, activities, orders and transactions undertaken.
- Commission Delegated Regulation (C(2025)1216) adopted in accordance with Article 72(5) of MiCAR sets out RTS specifying the requirements for policies and procedures on conflicts of interest for cryptoasset service providers and the details and methodology for the content of disclosures on conflicts of interest.
- Commission Delegated Regulation (C(2025)1220) adopted in accordance with Article 32(5) of MiCAR contains RTS specifying the requirements for policies and procedures on conflicts of interest for issuers of asset-referenced tokens.
The Council of the EU and the European Parliament will now scrutinise the Delegated Regulations. If neither objects, they will be published in the Official Journal of the European Union and enter into force 20 days after publication.Topic : FinTech -
EBA opinion on EC's partial rejection of RTS on information required in application for authorisation of ARTs
27 February 2025
The European Banking Authority (EBA) has published an opinion (dated 25 February) on the European Commission's (EC's) amendments relating to the final draft regulatory technical standards (RTS) on the information to be included in the application for authorisation to offer the public and to seek admission to trading of asset-reference tokens (ARTs) under Article 18(6) of the Markets in Crypto-Assets Regulation (MiCAR). The EBA has endorsed the substantive amendments to the draft RTS submitted by the EC and has accepted the remaining changes on other parts that are not considered substantive.
The EBA also published a letter to the EC setting out its intention to accept the changes but inviting the EC to consider amending the Level 1 text at the next available opportunity, to include certain elements that were set out in the draft RTS, given their importance from a supervisory perspective. In particular, the EBA suggest that the EC amend MiCAR to address the requirements of (i) a market abuse policy; (ii) an independent third-party audit about the issuer's proprietary DLT that is operated by the issuer or by a third-party operator; and (iii) a notion of good repute aligned with the rest of the financial sector.Topic : FinTech -
ESMA guidelines on maintenance of systems and security access protocols under MiCAR
26 February 2025
The European Securities and Markets Authority (ESMA) has published official translations of the guidelines on the maintenance of systems and security access protocols for offerors and persons seeking admission to trading of cryptoassets other than asset referenced tokens (ARTs) and e-money tokens (EMTs). The guidelines apply to competent authorities and to 'offerors' as defined in Article 3(1)(13) of the Markets in Crypto-Assets Regulation (MiCAR) and persons seeking admission to trading of cryptoassets other than ARTs or EMTs in relation to Article 14(1), point (d), of MiCAR.
The purpose of these guidelines is to specify the appropriate standards for offerors and persons seeking admission to trading who are not subject to the same operational resilience under MiCAR and the Digital Operational Resilience Regulation as their cryptoasset service provider and issuer counterparts. The guidelines include discussion of: (i) the general principle on proportionality; (ii) administrative arrangements and roles and responsibilities concerning systems and security access protocols; (iii) physical security access protocols; (iv) security access protocols for network and information systems; and (v) cryptographic key management.
The guidelines will apply from 27 April. National competent authorities must notify ESMA by 26 April whether they comply, do not comply but intend to comply or do not intend to comply with the guidelines. Offerors and persons seeking admission to trading are not required to report whether they comply with the guidelines. -
ESMA guidelines on cryptoasset transfer services under MiCAR
26 February 2025
The European Securities and Markets Authority (ESMA) has published official translations of its guidelines on the procedures and policies, including the rights of clients, in the context of transfer services for cryptoassets under the Markets in Crypto-Assets Regulation (MiCAR) on investor protection. The guidelines apply to competent authorities and cryptoasset service providers (CASPs) that act as providers of transfer services for cryptoassets on behalf of clients within the meaning of Article 3(1)(26) of MiCAR. These guidelines aim to ensure the common, uniform and consistent application of the provisions in Article 82 of MiCAR. They include guidelines on: (i) the policies and procedures in the context of transfer services for cryptoassets; (ii) information requirements on individual transfers for cryptoassets; (iii) execution times and cut-off times; (iv) rejection or suspension of an instruction to transfer cryptoassets or return of cryptoassets transferred; and (v) the liability of the CASP.
The guidelines will apply from 27 April. National competent authorities must notify ESMA by 26 April whether they comply, do not comply but intend to comply or do not intend to comply with the guidelines. Cryptoasset service providers are not required to report whether they comply with the guidelines. -
ESMA guidelines on reverse solicitation under MiCAR
26 February 2025
The European Securities and Markets Authority (ESMA) has published official translations of its guidelines on situations in which a third-country firm is deemed to solicit clients established or situated in the EU and supervision practices to detect and prevent circumvention of the reverse solicitation exemption under the Markets in Crypto-Assets Regulation (MiCAR). The guidelines apply to competent authorities in relation to Article 61(3) of MiCAR. The guidelines include discussion of: (i) the means of solicitation; (ii) the fact that the solicitation may be carried out by the third-country firm itself or any person acting on its behalf or having close links with the third-country firm; and (iii) the construction of the concept of 'exclusive initiative of the client'. The Annex to the guidelines contains a non-exhaustive list of examples of circumstances where a third-country firm is likely to be regarded as soliciting clients in the EU.
The guidelines will apply from 27 April. National competent authorities must notify ESMA by 26 April whether they comply, do not comply but intend to comply or do not intend to comply with the guidelines. -
FSB letter to G20 finance ministers and central bank governors ahead of meeting
24 February 2025
The Financial Stability Board (FSB) has published a letter (dated 21 February) to the G20 finance ministers and central bank governors ahead of their meeting on 26 and 27 February. The letter addresses areas of focus for the FSB, including:- Implementation monitoring, providing a strategic review of the FSB's monitoring of 15 years of implementation of reforms. The review is intended to provide valuable insights into the effectiveness of the monitoring of post-global financial crisis regulatory reforms and identify areas where improvements can be made in the tools used to ensure consistent, global implementation of agreed reforms. The FSB will publish a progress report in October.
- Completing the G20 roadmap to enhance cross-border payments. The FSB note that as the work has advanced, many structural issues have become apparent that require concerted efforts to resolve. Addressing these issues calls for significant additional work up to and beyond 2027. The FSB will report in October on progress towards the G20's goal of making cross-border payments faster, cheaper, more transparent, and accessible. The FSB's focus this year is on improving the end-user experience, coordinating closely the work of the Bank for International Settlements Committee on Payments and Market Infrastructures and other partner organisations.
Read more. -
Wolfsberg Group FAQs to help assess risks generated by the emergence of digital assets for AML and CTF purposes
21 February 2025
The Wolfsberg Group has published FAQs on defining digital assets. The FAQs propose definitions to be used by financial institutions, policymakers, supervisors and regulators to understand the characteristics of digital assets, money laundering, terrorist financing and operational risks they generate, as well as serve as an input to financial institutions developing policies and appropriate controls. The Wolfsberg Group intends to supplement these FAQs in future with guidance on the risks and associated controls for digital assets in line with the concepts developed in the FAQs.
The Wolfsberg Group has also published guidance on payment transparency roles and responsibilities to supplement the Wolfsberg Group Payment Transparency Standards. -
FSB thematic peer review on global regulatory framework for cryptoasset activities
21 February 2025
The Financial Stability Board (FSB) has published summary terms of reference for its thematic peer review on the FSB global regulatory framework for cryptoasset activities. The objective of this peer review is to examine members' progress, experience and lessons learned in implementing the FSB global regulatory framework for cryptoasset activities. This includes the high-level recommendations for the regulation, supervision and oversight of both cryptoasset markets and activities, and global stablecoin arrangements. It will focus particularly on the: (i) regulatory frameworks and implementation status; (ii) data reporting; (iii) cross-border cooperation; and (iv) stablecoins. The FSB expects to publish the peer review report in October.
The FSB is seeking feedback from stakeholders as part of its thematic peer review and a questionnaire has been distributed to relevant jurisdictions to collect information. The FSB invites feedback on issues such as: (a) the impact of jurisdictional regulatory frameworks on decisions of cryptoasset issuers and service providers; (b) experiences and challenges faced by cryptoasset market participants in meeting the relevant regulatory and supervisory requirements; (c) how financial stability vulnerabilities of cryptoasset activities differ across jurisdictions; and (d) whether there are specific market practices and/or trends in certain geographies and/or segments that may pose a threat to financial stability.
Feedback should be submitted by 28 March.Topic : FinTech -
EU MiCAR technical standards published
20 February 2025
Two delegated acts were published in the Official Journal of the European Union (OJ) in respect of the EU MiCAR.- Commission Delegated Regulation (EU) 2025/303, which comprises regulatory technical standards specifying the information to be included by certain financial entities in the notification of their intent to provide crypto-asset services.
- Commission Implementing Regulation (EU) 2025/304, which comprises implementing technical standards for the standard forms, templates and procedures for the notification by certain financial entities of their intention to provide crypto-asset services.
Both sets of technical standards concern the notification requirements applied to certain firms seeking to provide crypto-asset services, where article 60 of MiCAR imposes a requirement to supply specified information to the competent authority of the applicant's home member state at least 40 working days before providing those services. The Delegated and Implementing Regulations will enter into force on the twentieth day following their publication in the OJ. -
Eurosystem update on settling DLT transactions in central bank money
20 February 2025
The European Central Bank (ECB) has published a press release confirming its decision to expand its initiative to settle transactions recorded on distributed ledger technology (DLT) in central bank money. The press release confirms that the Eurosystem will develop a settlement platform that is interoperable with trans-European automated real-time gross settlement express transfer system (referred to as TARGET) services, and will also consider a more integrated, long-term solution for settling DLT transactions in central bank money which will include international considerations. This expansion follows the Eurosystem's work last year on new technologies for wholesale central bank money settlement, which comprised various settlement experiments and included bank, financial market and DLT platform participants. -
UK regulators publish feedback statement on big tech and digital wallets
19 February 2025
The UK Financial Conduct Authority (FCA) and the UK Payment Systems Regulator (PSR) have issued a joint feedback statement on the usage and impact of big tech and digital wallets (FS25/1). The feedback statement was accompanied by a press release and joint letter to the UK Competition and Markets Authority (CMA) regarding the CMA's invitation to comment on investigations in relation to certain mobile ecosystems. The feedback statement highlights four potential issues around big tech and digital wallets:- First, there are competition concerns as between different digital wallets (and mobile ecosystems).
- In addition, there are competition concerns as between payment systems within digital wallets, particularly where digital wallets do not provide a choice of payment methods except for cards.
- Operational resilience and consumer rights and protection are an issue, given that reliance on digital wallets could impact the financial system's resilience if consumers do not have other means of payment.
- Finally, there are regulatory perimeter questions around whether the regulatory framework should include digital wallets in order to be more effective (although some responses raised concerns that this approach may hinder innovation).
Read more. -
ESMA consultation on MiCAR guidelines on assessment of knowledge and competence
17 February 2025
The European Securities and Markets Authority (ESMA) has published a consultation paper on the guidelines for the criteria on the assessment of knowledge and competence under Markets in Crypto-Assets Regulation (MiCAR). The guidelines relate to natural persons giving advice or information about crypto-assets or a crypto-asset service. In terms of approach, ESMA has taken as a reference the Markets in Financial Instruments Directive guidelines on the assessment of knowledge and competence.
ESMA proposes four guidelines. The first guideline is a general guideline to ensure that crypto-asset service providers (CASPs) take sufficient steps to ensure that their staff providing information or advice on crypto-assets or crypto-asset services possess the necessary knowledge and competence to fulfil their obligations. This includes an understanding of how to apply the CASPs internal policies and procedures designed to comply with MiCAR. Guideline two concerns criteria for staff giving information about the relevant crypto-assets or crypto-asset services. Guideline three concerns criteria for staff giving advice about crypto-assets or crypto-asset services, and addresses the minimum requirements for professional qualification and professional experience, as well as the minimum number of hours of continuous professional development or training per year. Finally, guideline four on organisational requirements states that CASPs' organisational requirements should ensure that the knowledge and competence of the staff giving information and advice on crypto-assets or crypto-asset services is assessed, maintained and updated appropriately.
The deadline for comments is 22 April. ESMA will publish a final report and guidelines in Q3 this year. -
Eight Delegated Regulations under MiCAR published in Official Journal of the European Union
13 February 2025
Eight Delegated Regulations supplementing the Markets in Crypto-assets Regulation (MiCAR) have been published in the Official Journal of the European Union (OJ).
Read more.Topic : FinTech -
European Central Bank decision on non-bank payment service providers' access
6 February 2025
The European Central Bank (ECB) has published Decision (EU) 2025/222 relating to access by non-bank payment service providers (NB-PSPs) to Eurosystem central bank operated payment systems and central bank accounts. The EU Instant Payments Regulation (Regulation (EU) 2024/886) introduced certain changes to the EU Settlement Finality Directive (SFD) and Payment Services Directive (PSD 2), including adding NB-PSPs to the list of institutions eligible to become participants in payment systems designated under the SFD and permitting NB-PSPs to deposit their clients' funds for safeguarding in a separate account in a bank or central bank, at the central bank's discretion.
The ECB's decision: (i) sets out the circumstances in which a Eurosystem central bank should provide access to central bank operated payment systems, (ii) prohibits Eurosystem central banks from offering or providing safeguarding accounts to NB-PSPs or crypto-asset services providers, (iii) determines the maximum amounts that may be held by an NB-PSP across its accounts at any given central bank operated payment system, and (iv) provides for penalties in the event that an NB-PSP fails to comply with the maximum holding amount limit or requirements for access to central bank operated payment systems.
The Decision will enter into force on 26 February 2025 and will apply from 9 April 2025.
For more information on the issues and developments relating to fintech, see our blog A&O Shearman on fintech and digital assets. -
Financial Services and Markets Act 2023 (Digital Securities Sandbox) (Amendment) Regulations 2025 laid
January 30, 2025
The Financial Services and Markets Act 2023 (Digital Securities Sandbox) (Amendment) Regulations 2025 were laid before parliament, together with an explanatory memorandum. The Regulations relate to the Digital Securities Sandbox, which is a temporary supervisory regime allowing firms to test certain innovative financial market infrastructure activities that launched on September 30, 2024. The Regulations amend the Sandbox by modifying the application of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 to Sandbox participants. This is to ensure that firms which may already be registered or authorized with the FCA for other activities need not register separately with the FCA as a cryptoasset business for the purpose of undertaking Sandbox activities. The explanatory memorandum accompanying the Regulations also confirms that a number of firms have successfully completed the approvals process for the Sandbox and passed through Gate 1 (the testing stage). The Regulations make certain other minor amendments, and come into force on March 3, 2025. -
Financial Stability Board publishes work program for 2025
January 23, 2025
The Financial Stability Board has published its work program for 2025. Priority areas of work for 2025 include:- supporting global cooperation on financial stability: the FSB will continue monitoring global financial stability developments and the implications of emerging financial innovation, and conduct in-depth analysis on vulnerabilities in non-bank financial intermediation and climate change;
- enhancing the resilience of NBFI: while preserving its benefits, the FSB workstream includes finalizing policy recommendations on NBFI leverage, developing and beginning implementation of a medium-term workplan to address issues relating to non-bank data availability, use and quality and analyzing the resilience and functioning of the repo market;
- harnessing the benefits of digital innovation while containing its risks: the FSB will produce a thematic peer review on implementation of its crypto-asset recommendations, a report on how financial authorities can monitor AI adoption and assess related vulnerabilities, and finalize the format for incident reporting exchange;
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UK Financial Services and Markets Act 2000 (Collective Investment Schemes) (Amendment) Order 2025 published
January 9, 2025
The Financial Services and Markets Act 2000 (Collective Investment Schemes) (Amendment) Order 2025 has been published, alongside an explanatory memorandum. The Order includes a new paragraph 22 to the Schedule to the Financial Services and Markets Act 2000 (Collective Investment Schemes) Order 2001 (the "CIS Order"). The Schedule to the CIS Order specifies the kinds of arrangements which do not amount to a collective investment scheme. The new paragraph clarifies that arrangements for qualifying crypto-asset staking do not amount to a collective investment scheme. The aim of the instrument is to provide clarity to firms so that they are able to offer staking services to their U.K. customers without being subject to the collective investment scheme rules for this activity. The U.K. government has considered the need for an appropriate degree of consumer protection from the risks associated with the marketing of staking products and considers that this protection is delivered by communications on staking arrangements provided in compliance with the requirements of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 and relevant FCA rules and guidance. The Order comes into force on January 31, 2025.
For more information on the issues and developments relating to fintech, see our blog A&O Shearman on fintech and digital assets. -
European Banking Authority consults on draft technical standards on the prudential treatment of crypto-assets exposures
January 8, 2025
The European Banking Authority has published a consultation paper on its draft Regulatory Technical Standards on the calculation and aggregation of crypto-exposure values under the Capital Requirements Regulation 3. The RTS specify the technical elements necessary for institutions to calculate and aggregate crypto-asset exposures in relation to the prudential treatment of such exposures. The RTS aim to address implementation aspects and ensure harmonization of the capital requirements on crypto-assets exposures by institutions across the EU.
The draft RTS also further develop the relevant capital treatment for credit risk, counterparty credit risk, market risk and credit valuation adjustment risk for 'asset reference tokens' and 'other' crypto-assets exposures and align, to the extent possible, the capital treatment with the elements specified in the Basel standard on prudential treatment of crypto-asset exposures.
Read more. -
European Commission writes to EU authorities on the interplay between crypto asset and payment services regulations
December 10, 2024
The European Banking Authority has published a letter from the European Commission (dated December 6, 2024) to the EBA and the European Securities and Markets Authority regarding the interplay between Markets in Crypto Assets Regulation and the Payment Services Directive. The Commission notes the diverging interpretations among member states about the interplay between MiCAR and PSD2 and asks the EBA, with ESMA, to explore the possibility of issuing a "no action letter" on the enforcement of PSD2 authorization requirements as regards services with electronic money tokens provided by crypto asset service providers (or by entities benefiting from the transitional period under MiCAR) that may be inadvertently caught by PSD2. Where dual authorization would nevertheless be required, the Commission invites the EBA, with ESMA, to explore whether the PSD2 authorization process could be streamlined to reduce the operational burden on institutions. The EBA has responded (in a letter dated December 10, 2024), stating that it agrees with the concerns, and is assessing the issues in co-ordination with ESMA. The EBA aims to publish a response by April 2025.
For more information on the issues and developments relating to FinTech, see our blog A&O Shearman on fintech and digital assets. -
UK Financial Conduct Authority Policy Statement on Changes to Financial Crime Guide
November 29, 2024
The U.K. Financial Conduct Authority has published a policy statement on changes to its financial crime guide, following its consultation in April. The changes cover the following areas: (i) sanctions—to reflect information learnt from assessments of firms' sanctions' systems and controls following Russia's invasion of Ukraine in 2022; (ii) proliferation financing—to ensure that proliferation financing is explicitly referenced throughout the guide, where appropriate. This includes highlighting a 2022 change to the MLRs, which requires firms to conduct proliferation financing risk assessments; (iii) transaction monitoring—to provide further guidance on how firms can implement and monitor transaction monitoring systems. This includes supporting responsible innovation and new technological approaches; (iv) cryptoasset businesses—to make clear that cryptoasset businesses registered under the MLRs should refer to the guide; (v) Consumer Duty—to clarify that firms should consider whether their systems and controls are consistent with their obligations under the Duty; and (vi) consequential changes—includes replacing expired links, updating outdated references to EU rules and refreshing case studies based on more recent FCA enforcement notices.
Read more. -
UK Financial Conduct Authority Discusses Strategy for 2025 to 2030
November 26, 2024
The U.K. Financial Conduct Authority has published a speech by Emily Shepperd, FCA Chief Operating Officer, on the FCA's strategy for 2025 to 2030. In the speech, Ms. Shepperd sets out the four main themes of the FCA's strategy. Ms. Shepperd emphasises that trust in both the FCA and the financial services sector underpins these themes and will be crucial as the FCA looks to pursue growth, alongside ensuring proportionality in regulation and encouraging innovation. She also explains that the FCA has decided to set its ambitions on 2030, a five-year strategy, learning from its first 3-year strategy that it takes time to deliver and cement change.
Read more. -
Speech: UK government's Approach to Tokenization and Regulation
November 25, 2024
HM Treasury has published a speech given on November 21, 2024, by Tulip Siddiq, Economic Secretary to the Treasury, on the U.K. government's approach to tokenisation and regulation. In the speech, Ms. Siddiq confirms that HM Treasury intends to implement the proposal for the financial services regulation of cryptoassets in the U.K. in full. The proposals were published in October 2023 and included proposals for the creation of various new regulated activities for cryptoassets, as well as associated regimes for both admissions to trading and market abuse. HM Treasury also intends to proceed with removing the legal uncertainty over whether cryptoasset staking services constitute a collective investment scheme under financial services law. HM Treasury is also proceeding with the proposals for new regulated activities for stablecoin. Ms. Siddiq explains that the regulated activity for stablecoin issuance will ensure that the FCA can properly manage stablecoin specific risks, most notably those associated with management of the backing assets. This proposal will be implemented to the same timetable as the rest of the regulatory regime for cryptoassets.
For more information on the issues and developments relating to FinTech, see our blog A&O Shearman on fintech and digital assets. -
International Organization of Securities Commissions Publishes Roadmap to Enhance Retail Investor Online Safety
November 19, 2024
The International Organization of Securities Commissions has launched a new roadmap for retail investor online safety. The strategic initiative aims to safeguard retail investors worldwide from fraud, excessive risk, and misinformation as digital trading and social media reshape the retail financial market.
Read more. -
Financial Stability Board Publishes Letter to G20 Leaders and 2024 Annual Report
November 18, 2024
The Financial Stability Board has published a letter sent to the G20 leaders ahead of their meeting on November 18, 2024, together with the FSB 2024 annual report. The letter warns of ongoing vulnerabilities within the global financial system, illustrated by recent episodes of market turmoil and the failure of several banks and non-banks in recent years. The letter stresses the importance of effective implementation of the FSB's policies, emphasizing that authorities must not only put policies into national laws and regulations, but also build the capacity to operationalize them.
In the annual report, the FSB provides an overview of its work in its key priority areas, which include: (i) addressing lessons from the March 2023 banking turmoil; (ii) enhancing the resilience of non-bank financial intermediation; (iii) addressing financial risks from climate change; (iv) improving cross-border payments; (v) responding to technological innovation; and (vi) enhancing the resolvability of central counterparties. Looking ahead, the FSB will continue to focus on these priority areas and will also place an emphasis on: (a) implementation monitoring of its recommendations on crypto-asset activities and global stablecoin arrangements; (b) further work on resolution reforms; and (c) regular monitoring and progress reports on financial stability issues.
For more information on the issues and developments relating to FinTech, see our blog A&O Shearman on fintech and digital assets. -
Mansion House 2024
November 14, 2024
Rachel Reeves, the U.K. Chancellor has set out a package of reforms in her Mansion House speech. The reforms aim to drive growth and competitiveness in financial services. Ms. Reeves stated that the regulatory changes post-financial crisis created a system which sought to eliminate risk-taking that 'has gone too far' and has led to unintended consequences. Ms. Reeves hopes to maintain the U.K.'s high regulatory standards while rebalancing elements of the regulatory system to drive economic growth and competitiveness.
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Mansion House: Financial Services Growth and Competitiveness Strategy
November 14, 2024
HM Treasury has launched a call for evidence on a proposed Financial Services Growth & Competitiveness Strategy, a key part of the latest Mansion House reforms. Once developed, the Strategy will serve as the central guiding framework for the next ten years through which the government aims to deliver sustainable, inclusive growth for the financial services sector and secure the U.K.'s competitiveness as an international financial center. To meet its objectives, the proposed strategy sets out five core policy pillars central to sustainable growth: innovation and technology, regulatory environment, regional growth, skills and access to talent, and international partnerships and trade. The proposed strategy also identified five priority growth areas within the financial services sector: fintech, sustainable finance, capital markets (including retail investment), insurance and reinsurance markets, and asset management and wholesale services. Responses to the call for evidence may be submitted is December 12, 2024. HM Treasury intends to publish the strategy in Spring 2025.
Read more. -
The UK Economic Crime and Corporate Transparency Act 2023 (Commencement No. 3) Regulations 2024 Published
November 6, 2024
The Economic Crime and Corporate Transparency Act 2023 (Commencement No. 3) Regulations 2024 have been published. The Regulations bring into force certain provisions of the Economic Crime and Corporate Transparency Act 2023. Regulation 2 brings measures relating to civil recovery of crypto-assets, which are already in force in England, Wales, and Northern Ireland, but only partially in force in Scotland, fully into force on November 7, 2024. Regulation 3 brings into force measures creating a new offense of failure to prevent fraud on September 1, 2025.
For more information on the issues and developments relating to FinTech, see our blog A&O Shearman on fintech and digital assets. -
Draft Financial Services and Markets Act 2023 (Addition of Relevant Enactments) Regulations 2024 Published
October 31, 2024
The draft Financial Services and Markets Act 2023 (Addition of Relevant Enactments) Regulations 2024 have been published, together with an explanatory memorandum. The Regulations add to the list of "relevant enactments" for the purposes of sections 13 to 17 of the Financial Services and Markets Act 2023. Under section 13 of FSMA 2023, HM Treasury may make regulations which may modify the effect or application of such relevant enactments for the purpose of testing the efficiency or effectiveness of new technologies or practices in the carrying on of financial markets infrastructure activities, the FMI sandbox. The Regulations will bring the following relevant enactments into scope of the FMI Sandbox powers: (i) the Stock Transfer (Gilt-edged Securities) (CGO Service) Regulations 1985; (ii) the Government Stock Regulations 2004; (iii) the Money Laundering Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017; and (iv) the Prospectus Regulation. The effect is to include new relevant enactments within the list at section 17(3) of FSMA 2023 so that these enactments can be modified by FMI sandboxes. Bringing the Stock Transfer Regulations, the Government Stock Regulations, and the Money Laundering Regulations into scope is intended to facilitate activity in the first FMI Sandbox, the "Digital Securities Sandbox" and relevant amendments will be set out in detail in a later statutory instrument and accompanying explanatory memorandum. Bringing the U.K. Prospectus Regulation into scope of the FMI Sandbox powers is designed to facilitate the creation of PISCES. The Regulations have been laid before Parliament and will come into force the day after the day on which they are made. -
FCA Financial Promotions Quarterly Data 2024 Q3
October 25, 2024
The U.K. Financial Conduct Authority has published its financial promotions quarterly data for Q3 2024. The FCA summarizes the data collected between July 1 and September 30, 2024 and the action it took against firms breaching financial promotion rules, and referrals and investigations into unregulated activity. The FCA also shows where it is working to improve standards across the market so that consumers are provided with clear and fair financial promotions which are not misleading.
Key messages include:- the FCA's interventions in Q3 resulted in 10,593 promotions being amended or withdrawn by authorized firms, including one firm who withdrew 6,792 promotions, many of which were historical promotions withdrawn as a precaution;
- the FCA issued 552 alerts on unauthorized firms and individuals, 12% of which were clone scams;
- the cryptoasset financial promotions regime came into force on October 8, 2023 and has now been live for a year. Over the last year the FCA has issued 1,702 consumer alerts about illegal crypto promotions, which has resulted in the take down of over 900 scam crypto websites and the removal of 56 apps from U.K. apps stores. The FCA are continuing to work with social media companies to remove and block illegal content on their platforms; and
- the FCA is actively engaging with firms who appear to be providing and advertising unauthorized debt advice and debt solutions to consumers via online promotions. The FCA continues to observe trends of aggressive sponsored promotions placed by unauthorized firms, particularly through TikTok and paid-for Google advertisements.
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UK Policy Statement and Final Guidance on the Digital Securities Sandbox
September 30, 2024
The Bank of England and Financial Conduct Authority have published a joint policy statement providing feedback to responses received to the Digital Securities Sandbox joint consultation (CP24/5). We discussed the proposals in April in "UK Regulators Consult on Digital Securities Sandbox". The policy statement covers the following topics: (a) the approach to regulating DSS firms; (b) the scope of the DSS; (c) settlement of the payment leg; (d) operation of the DSS; (e) Gate 2 and end-state rules; (f) supervision of the DSS; and (g) other general issues relating to the DSS. Overall respondents welcomed the regulators proposals, with no respondents explicitly disagreeing with the creation of the DSS.
In response to feedback, the BoE and FCA have made some changes to their proposed approach and guidance, such as: (i) extending the scope of the DSS to include non-GDP (non-pound sterling) denominated assets; (ii) a more flexible approach to firm-specific limits at Gate 2, moving from fixed 'go-live' limits to a flexible range; and (iii) reducing the minimum capital requirement for a DSD from nine to six months of operating expenses.
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UK Financial Conduct Authority Outlines Future of UK Digital Regulation
04/22/2024
The U.K. Financial Conduct Authority's Chief Executive, Nikhil Rathi, gave a speech on April 22, 2024, setting out the priorities of the Digital Regulation Cooperation Forum. The DRCF brings together the FCA, the Competition and Markets Authority, the Information Commissioner's Office and Ofcom to facilitate collaboration on digital regulation.
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UK Legal Statement on Digital Assets and English Insolvency Law
04/22/2024
The UK Jurisdiction Taskforce (UKJT) has published a Legal Statement on Digital Assets and English Insolvency Law. The main findings are that digital assets are within the definition of "property" in the U.K. Insolvency Act 1986. Despite this, because digital assets are not treated as such, it is not possible to serve a valid statutory demand for a digital asset debt. Nevertheless, a claim to digital assets held by a company or bankrupt individual can (in principle) be a claim to recover property, depending on how the assets are held. In addition, where jurisdiction is to be determined by reference to the Centre of Main Interests, the English courts will apply the existing test to establish the COMI of a company dealing in digital assets. There are existing rules that can be applied to allocate any shortfalls where digital assets belonging to different persons have been pooled. Digital assets do not require a fundamental change to the legal analysis of tracing, mixed accounts and shortfalls (although the technical structure of digital assets may be relevant). The rules in the FCA's Client Assets Sourcebook are unlikely to apply since digital assets are not considered to be money.
The UKJT has previously published two other legal statements relevant to digital assets and cryptocurrencies. The Legal Statement on the Status of Cryptoassets and Smart Contracts was published in November 2019, the analysis of which has been adopted by the courts (e.g., AA v Persons Unknown & Ors, Re Bitcoin [2019] EWHC 3556 (Comm)). The Legal Statement on the Issuance and Transfer of Digital Securities under English private law was published in February 2023.Topic : FinTech -
UK Proposes Design of the Future Entity for UK Open Banking
04/19/2024
On April 19, 2024, the U.K.'s Joint Regulatory Oversight Committee published proposals on the design of the future entity for UK Open Banking. The JROC is composed of the Financial Conduct Authority, the Payment Systems Regulator, HM Treasury and the Competition and Markets Authority. Responses to the proposals may be submitted until May 20, 2024.
The U.K. is seeking to enhance its open banking framework so as to promote competition and innovation for the benefit of consumers and businesses. The JROC is seeking feedback on the structure, governance and funding for both its interim and longer-term model, which involves establishing an interim entity (in H2 2024) and then a "Future Entity" (in 2026). The long-term regulatory framework for open banking will be backed by legislation, including the Data Protection and Digital Information Bill. The Bill features the introduction of Smart Data schemes that would enable, at the customer's request, the secure sharing of data with authorized third parties. The "Future Entity" would replace Open Banking Limited, which was established pursuant to the Retail Banking Market Investigation Order 2017. -
UK Regulators Consult on Digital Securities Sandbox
04/15/2024
On April 3, 2024, the Bank of England and U.K. Financial Conduct Authority published a joint consultation paper on proposed rules for the incoming digital securities sandbox. The Financial Services and Markets Act 2023 (discussed in our client note, A Boost for UK Financial Services) empowered HM Treasury to establish sandboxes to facilitate the use of digital assets in financial markets. HM Treasury confirmed its approach to the DSS, which is the first such sandbox, in December 2023. The DSS will offer eligible firms a modified set of rules and regulations for a period of five years, enabling them to test out services using technology such as distributed ledger technology and give the regulators time to finesse a regulatory regime. It is hoped that digital securities could bring advantages, such as streamlining processes and reducing settlement risk and settlement times.
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Law Commission Publishes Consultation on Digital Assets as Personal Property
02/22/2024The Law Commission, a U.K. body which makes suggestions for legislative reform, is consulting on wording for a possible draft piece of legislation establishing a third category of personal property that would encompass "digital assets". English law currently recognizes "things in possession" (i.e., physical assets) and "things in action" (i.e., intangible assets). In case law to date, for example AA v Persons Unknown [2019] EWHC 3556 (Comm) and at least 23 other cases, the English courts have had no trouble in identifying, or accepting, various kinds of crypto-assets as constituting property, despite the fact they are neither things in possession nor things in action. However, coverage for asset classes is somewhat patchy, leading to some legal uncertainties. The Law Commission consulted on potential reforms to the law surrounding digital assets in July 2022, publishing a final report in June 2023 which found that, while the common law should be the primary forum for law reform in this area, it should be supplemented with legislation confirming that digital assets are capable of attracting personal property rights. This follows the approach in certain other jurisdictions, which have legislated on the topic - Japan, for example, has arguably brought crypto-tokens within the sphere of property law via amendments to its Payment Services Act, while Liechtenstein has enshrined tokens in legislation as a new form of legal object. A number of other jurisdictions, including Hong Kong, Singapore and New Zealand, have developed case law finding digital assets can attract property rights but have not so far confirmed this in legislation.
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Law Commission Publishes Call for Evidence on Digital Assets and Electronic Trade Documents in Private International Law
02/22/2024
The Law Commission, a U.K. body which makes suggestions for legislative reform, has published a call for evidence on the operation of English private international law (conflicts of law rules) in relation to digital assets and "electronic trade documents" (trade documents like bills of lading and bills of exchange that are in electronic form).
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European Securities and Markets Authority Consults on Guidelines on Reverse Solicitation and Cryptoassets as Financial Instruments under the EU Markets in Crypto Assets Regulation
02/08/2024
The European Securities and Markets Authority has published two consultation papers on proposed guidelines under the EU Markets in Crypto Assets Regulation, one on reverse solicitation and the other on the classification of crypto-assets as financial instruments. Responses to the consultation papers should be submitted by April 29, 2024. ESMA plans to publish final reports on each of the guidelines by the end of 2024 at the latest.
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UK Legislates to Implement the Digital Securities Sandbox
01/12/2024
Legislation implementing the U.K.'s first digital sandbox – the Financial Services and Markets Act 2023 (Digital Securities Sandbox) Regulations 2023 – came into force on January 8, 2024. The DSS Regulations enable the Digital Securities Sandbox to be established. The regulators are expected to consult soon on the proposed application process and rule changes.
U.K. recognized investment exchanges, recognized central securities depositories and investment firms that are licensed to operate a multilateral trading facility or organised trading facility, as well as any other U.K. firms identified by the Financial Conduct Authority or Prudential Regulation Authority, may participate in the FMI sandbox as a "sandbox entrant". Sandbox arrangements carried out by a sandbox entrant must relate to either the activity of operating a trading venue or carrying on maintenance, notary or settlement functions in relation to in-scope instruments, or be ancillary to those activities. In addition to the ability of the primary sandbox entrant to carry out those activities within the sandbox, the following classes of firms may participate in FMI sandbox arrangements: firms using the services provided by the sandbox entrant; firms providing services to the sandbox entrant or its users; and firms carrying on activities or providing services in connection with an in-scope instrument used in connection with the FMI sandbox arrangements. By including this third class of firms, firms would be allowed to provide services that are ancillary or complementary to trading and settlement activities, such as clearing, within the sandbox.
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International Organization of Securities Commissions Publishes Recommendations on Decentralized Finance
01/10/2024
Following its consultation in 2023, the International Organization of Securities Commissions published its Policy Recommendations for Decentralized Finance on December 19, 2023. The nine recommendations are intended to promote consistency of global regulatory frameworks for DeFi in the interests of market integrity and investor protection.
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International Organization of Securities Commissions Publishes Recommendations for Crypto and Digital Assets Markets
01/08/2024Following its consultation in 2023, the International Organization of Securities Commissions published its Policy Recommendations for Crypto and Digital Asset Markets on November 16, 2023. The 18 recommendations are intended to promote consistency of regulatory frameworks for cryptoasset service providers. The recommendations apply to both cryptoassets and stablecoins, although regulators are encouraged to consider any particular issues posed by stablecoin arrangements when applying the recommendations.
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HM Treasury Confirms Approach to Digital Securities Sandbox
12/12/2023
Following its consultation earlier this year, HM Treasury has published a response to its consultation on the Digital Securities Sandbox, confirming that it will mostly adopt the approach consulted on to establish the DSS. The DSS, which will be the first sandbox to be established using new powers granted by the U.K. Financial Services and Markets Act 2023, is intended to facilitate the use of digital assets in financial markets. The DSS is designed to allow firms to: (i) establish and operate FMIs using digital asset technology; and (ii) perform the activities of central securities depositories and trading venues in relation to existing security classes.
HM Treasury intends to lay before Parliament draft legislation to implement the DSS, which will be run by the Financial Conduct Authority and the Bank of England. The regulators will be consulting soon on their proposed approaches to the DSS, including the application process and proposed rule changes.
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UK Future of Payments Review Report Published
11/29/2023
HM Treasury has published the Future of Payments Review report, setting out the Review's recommendations for HM Treasury, the regulators and industry that aim to improve the U.K.'s existing payments landscape for consumers. The report follows the July 2023 call for evidence. The main recommendation is for the government to develop a National Payments Vision and Strategy, which will provide high-level guidance on priorities and define guiding principles on safety, simplification, coordination, responsiveness, inclusivity and accountability.
The Review makes several other recommendations.
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Bank of England Proposes Regulatory Regime for Systemic Payment Systems Using Stablecoins
11/27/2023
The Bank of England has published a discussion paper on its proposed approach to developing a regulatory regime for systemic payment systems using stablecoins and related service providers. The BoE’s paper follows the government’s recent Policy Paper on Plans for the Regulation of Fiat-backed Stablecoins which confirmed that these types of stablecoins will be brought into the U.K. regulatory perimeter.
This is part of HM Treasury’s plan to regulate cryptoassets, focusing first on fiat-backed stablecoins. The BoE will be responsible for the financial stability of systemic payment systems using stablecoins. The Financial Conduct Authority will supervise non-systemic fiat backed stablecoins for prudential and conduct of business purposes, and systemic fiat-backed stablecoins for conduct purposes only, and has published a discussion paper alongside the BoE's discussion paper. Responses to both discussion papers may be submitted until February 6, 2024. The Prudential Regulation Authority will supervise banks' activities in tokenized deposits. The PRA has written to banks stating that any business in fiat-backed stablecoins will, among other things, need to be conducted from a separate legal entity under branding that is different to the bank' branding. The Payment Systems Regulator will supervise the competition aspects relating to systemic payment systems using fiat backed stablecoins.
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