Legal development

Financial Services SpeedRead: 16 November 2023 edition

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    Welcome to the latest edition of the Financial Services SpeedRead, a collection of bite-sized updates designed to help you keep on top of key regulatory developments in financial services over the preceding fortnight.  Please get in touch if you want to explore any of the topics covered in this fortnight's edition of Financial Services SpeedRead in more detail.

    Financial Markets

    1. ESMA: Press release: ESMA to put cyber risk as a new Union Strategic Supervisory Priority

    On 9 November 2023, the European Securities and Markets Authority (ESMA) published a press release highlighting a change to its Union Strategic Supervisory Priorities (USSPs) to focus on cyber risk and digital resilience, as well as ESG disclosures.

    As part of this priority shift, EU supervisors will place greater emphasis on the reinforcement of firms' ICT risk management through careful monitoring and, where necessary, taking supervisory action. This is consistent with ESMA's aim to keep pace with market and technological developments, whilst simultaneously monitoring potential effects of attacks across markets and firms. ESMA and national competent authorities will also continue working on ESG disclosures, with this aimed at tackling greenwashing, increasing investors understanding and embedding sustainability requirements when firms advise investors.

    The new USSP will come into force in 2025 alongside the Digital Operational Resilience Act, replacing the previous USSP on market data equality. This timeline is intended to provide supervisors and firms in Member States with sufficient time to prepare for compliance with the new regulatory requirements.

    2. European Parliament: Legislative resolution: European single access point (ESAP) Texts adopted

    On 9 November 2023, the European Parliament adopted the European Commission's proposals (with amendments) for a regulation establishing a European single access point (ESAP). 

    The purpose of the ESAP is to provide centralised access to publicly available information that is relevant to financial services, capital markets and sustainability of EU companies and investment products. This publicly accessible information will include: 

    • mandatory information, that is information which companies and other entities must disclose under EU regulations and directives, such as the Markets in Cryptoassets Regulation and the proposed European Green Bond Regulation; and
    • voluntary information, which companies and entities voluntarily choose to make accessible on ESAP. 

    In addition, the European Parliament also released a proposed regulation and directive setting out how current EU legislation is to be amended to enable the functioning of the ESAP.

    The Council of the EU is expected to formally adopt the proposals at first reading at an upcoming meeting. The legislative package is then expected to come into force on the twentieth day following its publication in the Official Journal of the European Union. Member States will have two years to implement most of the directive into national law, with 18 months to implement Article 3 relating to the Transparency Directive.

    3. HM Treasury: Policy paper: Extending the transitional period for third country benchmarks under the UK Benchmarks Regulation

    On 7 November 2023 (and updated on 8 November 2023), HM Treasury published a policy paper confirming that it will lay a statutory instrument amending Article 51(5) of the Benchmarks Regulation to extend the transitional period for third country benchmarks to 31 December 2030. Without this statutory instrument, the transitional period was due to expire at the end of 2025.

    HM Treasury intends for this statutory instrument to come into force on 1 January 2024, providing time for the government to consider whether reforms are needed to the third country benchmark regime as part of its wider Smarter Regulatory Framework programme. 

    Banking and Prudential

    4. HM Treasury: Statutory instruments: Central counterparties regime

    On 9 November 2023, HM Treasury published two statutory instruments relating to the introduction of a new resolution regime for central counterparties.

    Firstly, the Financial Services and Markets Act 2023 (Resolution of Central Counterparties: Calculation of Maximum Amounts for Cash Calls and Use of Specified Funds) Regulations 2023 sets the maximum amount of cash that they may be specified in cash call instruments created by the Bank of England (BoE). The Explanatory Memorandum states that:

    • by placing caps on the amount of cash that may be specified, the instrument will provide greater certainty to clearing members over the maximum amount that may be required to contribute under the cash call power, in the case a recognised central counterparty (CPP) is placed into resolution; and 
    • the instrument establishes circumstances in which the BoE can require the CPP to use its specified funds to meet the obligations imposed upon a clearing member by a cash call instrument, where that clearing member has failed to meet said obligations.

    Secondly, the Financial Services and Markets Act 2023 (Resolution of Central Counterparties: Deferment of Provisions in Resolution Instruments) Regulations 2023, as explained in the Explanatory Memorandum, sets out the process by which the BoE may suspend or waive, and where suspended, subsequently enforce, a provision under a resolution instrument. The Explanatory Memorandum states that this ensures the BoE has the required flexibility to respond to the specific circumstances of a resolution.

    HM Treasury intends to publish a Code of Practice which provides broader guidance around the resolution regime, including the power to defer obligations. 

    Both statutory instruments will come into force on 31 December 2023.

    5. HM Treasury and BoE: Consultation papers: Implementing the Bank of England Levy

    On 8 November 2023, HM Treasury published a consultation paper on the new BoE levy. The BoE also published a consultation paper on its approach to the levy. This levy is to replace the Cash Ratio Deposits Scheme. 

    In its consultation paper, HM Treasury seeks views on a draft version of the statutory instrument that will introduce the levy, being the Bank of England Levy (Amount of Levy Payable) Regulations 2024, and also provides an overview of the draft regulations. 

    Similarly, the BoE's consultation paper explains how the annual levy will be charged and how it will operate, and requests feedback on specific questions. 

    The BoE states that the timing for commencement of the levy will be decided after responses to the consultations have been received and considered, and thereafter will be subject to Parliamentary approval. 

    Funds Management

    6. FCA: Feedback statement: Long-Term Asset Funds (LTAFs) – Financial Services Compensation Scheme Coverage Feedback Statement

    On 30 October 2023, the FCA published a feedback statement on coverage under the Financial Services Compensation Scheme (FSCS) for long-term asset funds. 

    This feedback statement is in response to the FCA's policy statement PS23/7 in June 2023 on Long-Term Asset Funds (LTAFs), which set out the FCA's new rules to allow a broader range of retail investors and pension schemes to access LTAFs whilst still being aware of the risks involved. In the policy statement, the FCA also asked for feedback on whether it would be appropriate to remove FSCS cover for regulated activities relating to LTAFs. 

    Based on the feedback received, the FCA confirmed in its feedback statement that it will not proceed with excluding FSCS coverage for regulated activities related to LTAFs at this time. Instead, the FCA will consider any changes to the scope of FSCS protection for retail investments as a whole, rather than excluding certain investments products in isolation.

    Senior Managers and Governance

    7. FCA: Letter: Dear Chair of Remuneration Committee Letter

    On 31 October 2023, the FCA published a letter to the chairs of remuneration committees of investment firms, setting out key points to be considered and factored into their firms' remuneration approaches. 

    The key points raised in the letter include:

    • Ratio between fixed and variable components of total remuneration: the FCA referenced the changes to the remuneration regime that were proposed in its recent policy statement with the PRA (PS9/23). This includes increasing the proportion of compensation at risk and subject to the incentive-setting tools in the remuneration framework;
    • Putting consumers' needs first: the FCA asked firms to consider how they can use relevant risk metrics and performance criteria in their remuneration strategy to comply with the Consumer Duty, which came into effect on 31 July 2023;
    • Culture and accountability: the FCA expects firms to: (i) encourage a healthy culture; (ii) clearly set out roles and responsibilities which enable an effective system of individual accountability; (iii) ensure fitness and propriety of their senior managers and certified staff; and (iv) ensure there is a clear, strong and evidenced link between behaviours and remuneration outcomes;
    • Diversity and inclusion: the FCA referenced its consultation paper CP23/20 (which sets out its proposals on diversity and inclusion in the financial sector) and requested engagement on its proposals. The FCA also stated that it expects firms to maintain gender neutral pay policies and to ensure that variable remuneration is not discriminatory; and
    • Sustainability in finance: for firms which have committed to sustainability-related objectives (such as net zero commitments), the FCA stated that it expects firms to appropriately link such objectives with its strategy, governance arrangements and remuneration structures.

    The FCA has welcomed responses on how chairs will be adopting the principles suggested in the letter.

    Financial Crime

    8. European Commission: Commission Delegated Regulation: Regulatory technical standards regarding the AML/CFT central database

    On 9 November 2023, the European Commission published the adopted delegated acts text regarding a central AML/CFT database that will be maintained by the European Banking Authority (EBA). These delegated acts specify the type of information competent authorities shall report, how they shall report it and how the EBA will analyse and disseminate information from this database to competent authorities on a circumstantial and confidential basis.

    A key aspect of the delegated acts relates to the requirement that competent authorities report material AML and CFT weaknesses in individual financial sector operators that they have identified, as well as the measures they have taken to combat those material weaknesses. The draft technical standards further specify when such weaknesses are material, to ensure a harmonised approach to reporting.

    The Regulation will enter into force on the 20th day after its publication in the Official Journal of the European Union.

    9. FCA: Newsletter: Market Watch 75

    On 31 October 2023, the FCA published a newsletter on its observations about marketing soundings, following its publications of Market Watch 51 and Market Watch 58

    The FCA has observed cases where Market Sounding Recipients (MSRs) have traded the relevant financial instruments during the time period after a Disclosing Market Participant (DMPs) has initially communicated with them/sought the MSR’s consent, but before the DMP has disclosed the inside information. While the DMPs had not disclosed the identity of the financial instrument, details of the proposed transaction or the likelihood of it taking place, the MSRs were still able to identify those details from information available. 

    The FCA notes that, in such circumstances, MSRs could have an unfair advantage and concludes that MSRs who have identified the information (before consenting to receiving and protecting inside information) should assess whether they possess inside information before trading. The market sounding regime does not protect MSRs trading on inside information from market soundings.

    In summary, the FCA recommends the following actions to minimise the risk of insider dealing and unlawful disclosures:

    • DMPs should take care when making soundings on financial instruments that have few actors and where potential external information could be used to identify the relevant instrument;
    • DMPs should carefully consider the standardised information being provided in their initial communications and requests for consent; 
    • MSRs should consider "Gatekeeper" arrangements (as highlighted in Market Watches 51 and 58) and ensure staff are properly training on UK Market Abuse Regulation prohibitions; and 
    • both DMPs and MSRs should consider minimising the time interval between the DMP's initial communication and the requests for consent, and the MSRs consenting to such request. This will help reduce the risks of insider dealing.

    10. FATF: Report: Crowdfunding for Terrorism Financing

    On 31 October 2023, the Financial Action Task Force (FATF) published a report which analyses how terrorists exploit crowdfunding platforms and highlights best practices. 

    The report notes the following four main ways in which crowdfunding platforms can be abused for terrorism financing purposes: 

    • abuse of humanitarian, charitable or non-profit causes;
    • use of dedicated crowdfunding platforms or websites;
    • use of social media platforms and messaging apps; and
    • interaction of crowdfunding with virtual assets. 

    The FATF also identifies the challenges to detecting and deterring terrorism financing in these circumstances, including the use of anonymising techniques and a lack of training to detect suspicious activities.

    In its report, the FATF then sets out best practices combatting these types of threats, including strong information sharing, public-private sector engagement and the implementation of proportionate risk-based measures. To assist, the report includes a list of risk indicators to help identify suspicious activities related to crowdfunding.

    11. FCA: Review: Anti-fraud controls and complaint handling in firms (with a focus on APP fraud)

    On 7 November 2023, the FCA published its key findings following its review on anti-fraud controls and complaint handling in firms, focussing on Authorised Push Payment (APP) Fraud.

    The FCA provides examples of good practice and areas of significant failings in managing fraud risk and customer support. Of particular relevance, the FCA identified shortcomings in several areas, including the following:

    • an insufficient focus on delivering good consumer outcomes;
    • management information and actions often focused on commercial risk appetite and firm financials, rather than customer impact and treatment;
    • inadequate support provided to fraud victims, including from the first point of contact (and in many cases, insufficient processes to allow customers to report fraud easily and promptly);
    • poor complaints handling (e.g. poor response times);
    • the provision of decision letters to customers that were sometimes unclear, confusing, or included unhelpful and, at times, accusatory language; and
    • limited evidence that firms were appropriately considering characteristics of customer vulnerability while deciding on fraud claims and complaints.

    The FCA stated that they will continue to observe how payment firms are meeting their expectations to prevent APP fraud cases, as well as fraud more generally, and to put the needs of customers at the forefront. It also noted that payment service providers should regularly evaluate their approach to identifying the fraud risks that they and their customers are exposed to, as well as develop their defences against such risks.

    The FCA encourages firms to additionally consider the findings from its review into detecting and preventing money mules. For more information on that review, please see our last SpeedRead here.

    Retail Services

    12. EBA: Consultation paper: Draft Guidelines on complaints-handling of credit servicers under the EU Directive on Credit Services and Credit Purchasers

    On 9 November 2032, the EBA published a consultation paper relating to draft guidelines on complaints-handling of credit services under the EU Directive on Credit Servicers and Credit Purchasers (the Directive).

    The EBA's proposed guidelines specify the requirement on credit servicers to establish and maintain effective and transparent procedures for complaints-handling from borrowers, which is in accordance with the Directive.

    These guidelines are identical to the Joint Committee guidelines, which include requirements of:

    • a complaints management policy and function;
    • registration;
    • reporting;
    • an internal follow-up; and 
    • the provision of information and procedures when responding to complaints.

    The consultation will close on 9 February 2024, after which the final guidelines will be published.

    13. FCA: Dear CEO Letter: Action required: FCA expectations for wealth management & stockbroking firms

    On 8 November, the FCA published a Dear CEO letter addressed to the wealth management and stockbroking sector. The letter sets out the FCA's assessment of the sector's key harms and updated supervisory priorities, being the prevention of financial crime and meeting Consumer Duty outcomes. 

    Regarding financial crime, the key expectations of the FCA are for firms to: 

    • understand their financial crime risks by identifying their clients, including their expected transaction patterns and corporate structure;
    • not carry out tick box compliance exercises or outsource responsibility to third parties;
    • ensure they have robust and effective systems and control to counter financial crime and money laundering in a proportionate and risk-based manner;
    • ensure their SMF 16/17 holders have the required experience, skills, and independence in accordance with the FCA's expectations for heads of compliance and MLROs; and
    • read and fully implement the FCA's finance crime guidance (FCG) and thematic reviews (FCTR). 

    In relation to firms' implementation of the Consumer Duty, the FCA expects the following key actions to be carried out by firms:

    • to have a clear understanding of the needs and objectives of their target market and to ensure that products and services remain aligned to consumers' needs, risk profile and circumstances;
    • for firms' leadership teams to fully understand the level of exposure to risks and harms identified by the FCA in its letter and to manage those risks (including by investing capital if necessary); 
    • to test consumers' understanding of financial promotions and reassess vulnerability status based on the FCA's guidance; 
    • to avoid opting up consumers from retail to professional, unless this is supported by robust systems and controls;
    • to fully justify any complex and/or unregulated investments with a clear view of the suitability or appropriateness for the consumer; and
    • to regularly assess the overall cost and value for money of their products and services, and make changes where poor value is identified.

    The FCA reminds firms to consider all regulatory obligations and to notify the regulator of any issues that should be shared under Principle 11. Moving forward, the FCA confirms that supervision of firms in the sector will become more targeted, intrusive and assertive, with more unannounced visits and formal intervention. 

    14. HM Treasury: Consultation outcome: Financial promotion exemptions for high net worth individuals and sophisticated investors

    On 7 November 2023, HM Treasury published a paper setting out the Government's response to its consultation on financial promotion exemptions for high net worth individuals and sophisticated investors.

    Following the feedback, the Government will be making the following changes to the exemptions:

    • increasing the financial thresholds for the exemptions to account for inflation;
    • amending the eligibility criteria for the exemptions to reduce the risk of capturing ordinary consumers; and 
    • strengthening the statements that investors are required to complete when relying on the exemptions.

    The changes above are expected to come into force on 31 January 2024 via a statutory instrument.

    15. FCA: New webpages: "Consumer Duty resources" and "How we are using the Consumer Duty"

    On 1 November 2023, the FCA published a series of Consumer Duty resources, as well as a webpage entitled "How we are using the Consumer Duty" that sets out examples of the FCA putting the Consumer Duty "in action".

    Key publications that can be accessed via the webpages include:

    • sector-specific communications;
    • Dear Chair of the Remuneration Committee Letter 2023 (please see a summary of this letter at item 13 above); 
    • the speech by Nisha Arora, "Not once and done" (please see a summary of this speech at item 16 below); and
    • use cases of good and bad outcomes.

    16. FCA: Speech by Nisha Arora, Director of Cross Cutting Policy and Strategy: Consumer Duty: Not once and done

    On 31 October 2023, the FCA published a speech by Nisha Arora which examined the implementation of the Consumer Duty and the FCA's expectations moving forward.

    Throughout this speech, Ms Arora emphasised the need for firms to continuously integrate the principles that underly the Consumer Duty within their culture to ensure the best possible consumer outcomes on an on-going basis. This reflects the fact that the Consumer Duty is not a "once and done" event that firms can implement and then move on from.

    The FCA opined that firms will be required demonstrate that they are continuing to deliver good consumer outcomes. In particular, it was stated that firms should be able to evidence this in their annual board reports. 

    The FCA confirmed that the Consumer Duty will remain a key priority and that it will continue to work closely with firms to ensure that consumer outcomes are consistently improved.

    17. FCA: Press release: FCA secures contract changes for buy-now-pay-later customers as more consumers use the product

    On 31 October 2023, the FCA published a press release covering recent research that shows a significant increase in the use of buy-now-pay-later (BNPL).

    In particular, the research shows that 27% of adults have used BNPL at least once in the six months preceding January 2023, whilst also revealing that frequent users of BNPL are more likely to experience financial difficulty.

    The FCA also reminded readers that whilst it does not have regulatory oversight over BNPL products, it confirmed that it is determined to protect consumers using these financial services where it can. In this regard, the FCA noted that it has used its powers under the Consumer Rights Act 2015 to secure future changes to potentially unfair and unclear contract terms for unregulated BNPL terms.

    18. EU Parliament: Directive (EU) 2023/2225 on credit agreements for consumers and repealing Directive 2008/48/EC

    On 30 October 2023, the EU Parliament and Council of the EU published in the Official Journal of the European Union Directive 2023/2225 on credit agreements for consumers (CCD II), repealing the Consumer Credit Directive (2008/48/EC).

    The aim of CCD II is to address the issues identified in relation to the Consumer Credit Directive, including those that stemmed from the imprecise language use in the Directive and the impact of digitalisation on its application. As such, the objectives of CCD II are to:

    • lessen consumer harm and risks in taking out loans in a rapidly shifting market;
    • support enhanced cross-border provision of consumer credit; and
    • boost the competitiveness of the internal market.

    CCD II will enter into force on 19 November 2023, but will apply from 20 November 2026. For more information on CCD II, please see our Ashurst insight here.


    19. European Parliament and Council of the EU: Press release: Agreement reached on more accessible instant payment in euros

    On 7 November 2023, the European Parliament and the Council of the EU each published press releases regarding their agreement on the instant payments proposal, which will result in new rules to secure more accessible instant payment options in euros. 

    Under the provisionally agreed rules, payment service providers which provide standard credit transfers in euro must offer the service of sending and receiving instant payment (i.e. money transfers within 10 seconds at any time of day) within the same country and also to another EU Member State. Any applicable charges will also not be permitted to be greater than the charges for standard credit transfers.

    To safeguard against fraud, the agreement also provides that instant payment providers will need to confirm that a transfer recipient's name and International Bank Account Number (IBAN) match to warn the payer of possible errors or fraud prior to a transaction. 

    The agreement requires approval from the Economic and Monetary Affairs Committee and will also need to undergo a plenary vote, as well as be approved by the Council before entering into force.

    Digital Services and Fintech

    20.  EBA: Consultation Papers: MiCAR

    On 8 November 2023, the EBA published a series of consultation papers relating to the upcoming Markets in Crypto-assets Regulation (MiCAR) regime. This represents the third batch of consultations relating to the technical standard and guidelines that will be produced by the EBA in respect of the operation of MiCAR.

    The first set of papers relate to proposed draft Regulatory Technical Standards (RTS) and guidelines on the liquidity requirements under MiCAR, including in respect of liquidity stress testing of relevant token issuers. These papers can be summarised as follows:

    The second set of papers relate to the EBA's draft RTS on own funds requirements and stress testing of issuers. Specifically, the first paper in this set deals with the adjustment of own funds requirements of an issuer of asset-referenced tokens (ARTs) that is deemed to have a higher degree of risk, as well as the stress testing that must be conducted by ARTs issuers and e-money tokens (EMTs) issuers. The second paper covers the procedure and timeframe where an ARTs or EMTs issuer adjusts its own funds requirements on the basis that that the tokens it issues, or has issued, are classified as significant.

    The third set of papers consists of a standalone consultation on draft guidelines on recovery plans to be drafted by issuers of ARTs and EMTs, with this laying out the requirements regarding the format and content of such recovery plans.

    The fourth set of papers consists of, firstly, the EBA's draft RTS specifying the methodology to be applied by issuers of ARTs and EMTs denominated in a non-EU currency for reporting transactions associated to uses of these tokens "as a means of exchange". In addition, the EBA also published its Draft Implementing Technical Standards (ITS) which specify the related reporting requirements under MiCAR. 

    The final consultation paper (EBA/CP/2023/33) relates to draft RTS which set out the criteria for determining the composition of supervisory colleges for each issuer of a significant ART or a significant EMT, as well as the general conditions for the functioning of supervisory colleges.

    The closing date for feedback on all the consultation papers is 8 February 2024.

    21. European Commission: New webpage: Supervision of crypto-assets – criteria, procedures & fees

    On 8 November 2023, the European Commission published a webpage setting out information on its initiative to support EU rules on markets in crypto-assets (EU Regulation 2023/1114) (MiCAR). The initiative introduces:

    • criteria for an asset-referenced token or e-money token to be classified as significant;
    • the ability of a body or authority to restrict or ban the sale of crypto-assets or related activities; and
    • rules for the European Banking Authority to impose fines and charge supervisory fees.

    The webpage sets out four draft delegated acts that the Commission is seeking feedback on. The feedback period will close on 6 December 2023. The Commission will consider any feedback received when finalising the initiative.

    22. FCA and BoE: Publications: Proposals for regulating stablecoins

    On 6 November 2023, the BoE, PRA and FCA released a package of publications on their proposed regulatory approach to harness the potential benefits of stablecoins for UK consumers and retailers. The aim of the proposals is to protect consumers, prevent money laundering and safeguard financial stability. We summarise each of the relevant updates below:

    • The FCA's Discussion Paper explores the proposed regulation of fiat-backed stablecoins, including in the context of their use as a means of payment. The Discussion Paper aims to inform the development of the regulatory regime set out in HM Treasury's policy paper on the regulation of stablecoins (please see a summary of this policy paper at item 25 below), including outlining how the FCA proposes to regulate the issuance and custody of fiat backed stablecoins under FSMA, and the use of these stablecoins as a means of payment under the Payment Services Regulations 2017. Feedback is sought on the FCA's proposals by 6 February 2024. 
    • The BoE's Discussion Paper outlines proposed regulation applicable to systemic payment systems operators using stablecoins, and other entities that provide services to these payment systems, such as stablecoin issuers and wallet providers. The paper sets out the BoE's role in ensuring the safety of money and payments, and the scope and requirements of the proposed regime. The BoE has set out a number of questions in respect of its proposals and has also asked respondents to provide their feedback by 6 February 2024.
    • The PRA's Dear CEO letter sets out how it expects deposit-takers to address the risks arising from issuing multiple forms of digital money, while welcoming the benefits that could come from innovation and competition in this area. The letter also sets out the PRA’s broader expectations for banks in relation to their use of digital money for retail or wholesale innovations, in areas such as operational resilience, anti-money laundering, counter-terrorist financing, and liquidity and funding risks. The PRA asks firms to disclose any material updates to developments in their use of digital money or money-like instruments and how their plans continue to meet the PRA's expectations.

    The FCA, BoE and PRA also collectively published a Cross-authority roadmap setting out their approach to innovation in payments, money and money-like instruments, as well as how their current and proposed regulatory regimes for issuers will interact. By outlining their joint approach in this way, the regulators seek to remove any scope for regulatory arbitrage, while also providing certainty to firms on the regime applicable to them and maintaining the confidence of households and businesses on their ability to make payments.

    23. FCA: Guidance: Finalised non-handbook guidance on cryptoasset financial promotions

    On 2 November 2023, the FCA published finalised non-handbook guidance on cryptoassets promotions. The guidance does not create any additional obligations for firms, but rather aims to support firms in fulfilling their existing obligations. This includes by providing information on, and setting out the FCA's expectations of, the communication and approval of financial promotions relating to qualifying cryptoassets. The guidance also makes clear how the FCA considers crypto firms can comply with the requirement that financial promotions are fair, clear and not misleading.

    The FCA has further acknowledged that the cryptoasset market is fast-evolving, and states that this guidance will be kept under review as market practice and regulation shifts. 

    24. HM Treasury: Consultation outcome: Future financial services regulatory regime for cryptoassets

    On 30 October 2023, HM Treasury published the response to its consultation paper and call for evidence on the future financial services regulatory regime for cryptoassets. The response confirms the Government's final proposals for cryptoassets regulation in the UK, including its plans to bring several cryptoassets activities into the regulatory perimeter.

    The Government outlined the general sentiment of the feedback as follows:

    • out of the 131 responses received, approximately 80% of responses were generally supportive of the government's overall approach, 10% had mixed or neutral feedback and the remaining 10% were critical of the proposals; and
    • those respondents that were critical of the proposals generally outlined their fundamental disagreement with the Government's plans to bring cryptoassets into the regulatory perimeter (e.g. because they considered that these products should otherwise be banned or treated in line with gambling), while others outlined their disagreement with key aspects of the proposal such as the intention to focus regulation on the activities rather than the crypto assets themselves.

    The response also outlines how the submissions received from stakeholders have resulted in modifications being made to the original proposals, while also clarifying various aspects of the regime. This includes outlining the modified approach towards how the market abuse obligations will apply to cryptoasset exchanges.

    25. HM Treasury: Policy paper: Update on Plans for the Regulation of Fiat-backed Stablecoins

    On 30 October 2023, HM Treasury published a policy paper which provides further detail on the Government's plans for bringing fiat-backed stablecoins within the UK regulatory perimeter. This update follows HM Treasury's consultation response published in April 2022 on the UK's regulatory approach to cryptoassets, distributed ledger technology and stablecoins in financial markets. 

    The policy paper is specifically aimed at informing the development of the FCA and the BoE's supervisory approaches to regulating stablecoin issuers and custodians, and systematic digital settlement asset payment systems and service providers. In particular, it clarifies the Government's intention to define fiat-backed stablecoins in legislation, while also noting that this definition is expected to capture those stablecoins which seek to maintain a stable value by reference to a fiat currency, and hold (in part or wholly) currency as "backing". It is further noted that HM Treasury is considering making changes to the payments legislation to enable retail payments for goods and services to be made using fiat-backed stablecoins.

    The next stage of implementation is due to involve HM Treasury bringing forward secondary legislation as soon as possible and, in any case, by early 2024.


    There are no updates for this edition.



    There are no updates for this edition.

    The information provided is not intended to be a comprehensive review of all developments in the law and practice, or to cover all aspects of those referred to.
    Readers should take legal advice before applying it to specific issues or transactions.

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