Council of the European Union
MiCA - Council of the European Union adopts regulation - 16 May 2023
The Council of the European Union has published a statement announcing that it has adopted the EU’s proposed regulation on markets in cryptoassets (MiCA) 2020/0265(COD), marking the final step in the legislative process. This follows endorsement of MiCA by the European Parliament in April 2023.
MiCA applies to cryptoassets that do not already qualify as financial instruments, deposits or structured deposits under existing EU financial services legislation. In an accompanying press release, the Council states that MiCA will: “protect investors by increasing transparency and putting in place a comprehensive framework for issuers and service providers.” The new rules cover issuers of utility tokens, asset referenced tokens and stablecoins. They also cover service providers such as trading venues and the wallets where cryptoassets are held.
The next step is publication of MiCA in the Official Journal of the European Union. The regulation will enter into force 20 days after this publication.
Press release
House of Commons Treasury Committee
Regulating cryptoassets - House of Commons Treasury Committee publishes report - 17 May 2023
The Treasury Committee has published its report on regulating cryptoassets (the Committee). This follows an inquiry launched by the Committee in July 2022, and HM Treasury’s Consultation Paper on the future financial services regulatory regime for cryptoassets, published in February 2023.
The key points from the report are as follows:
- the most convincing cryptoasset use case the Committee has heard, is the potential for cryptoasset technologies to improve the efficiency and reduce the cost of making payments, especially in cross-border situations and in lower income countries with less developed financial sectors;
- the Committee considers that the significant risks posed by cryptoassets to consumers and the environment are real and present, and criticises the Government’s recent foray into seeking (and subsequently abandoning) the production of a Royal Mint non-fungible token as “it is not the Government’s role to promote particular technological innovations for their own sake”; and
- the Committee strongly recommends that the Government regulates retail trading and investment activity in unbacked cryptoassets as gambling rather than as a financial service, thereby avoiding a ‘halo’ effect that leads consumers to believe that this activity is safer than it is.
This report does not cover all aspects of the Committee’s inquiry into the cryptoasset industry, and in particular it does not cover central bank digital currencies which are being considered separately. The Committee will continue to follow developments in this space as both the industry and the Government’s regulatory approaches develop.
Report: Regulating crypto
Summary
Press release
Prudential Regulation Authority
Future of Supervision and Data - PRA publishes speech - 16 May 2023
The PRA has published a speech by Rebecca Jackson, PRA Director, on the PRA's strategy to transform its supervisory and firm data usage over the next five years, which is described as a “step change”.
The PRA plans to:
- enhance data collection practices by minimising unnecessary requests and ensuring timely access to essential data for monitoring and policymaking;
- by extension, cease collection of a significant number of the PRA’s current returns, while introducing some new returns, including some where the PRA will need firms to have the capacity (either routinely or in times of crisis) to submit them with a higher frequency and more quickly; and
- utilise technology, such as regulatory tech and common data standards, to improve data analysis and collection efficiency.
Ms Jackson emphasises that human intelligence and expert judgement will remain crucial to decision-making. Further, the PRA's "Transforming Data Collection" initiative aims to promote common data standards, which will make data collection more efficient.
Speech
Financial Conduct Authority
Remuneration - FCA publishes Consultation Paper (CP23/11) on enhancing proportionality for dual-regulated firms - 12 May 2023
The FCA has published a Consultation Paper (CP23/11) on proposals that aim to ensure that its remuneration rules for small dual-regulated firms are proportionate to the risks these firms pose to consumers and markets in the UK. The proposed changes only apply to firms subject to the dual-regulated firms Remuneration Code.
The FCA proposes to:
- amend its proportionality thresholds which allow smaller, less complex, dual-regulated firms to be excluded from some of the remuneration rules by increasing the total assets threshold and changing the additional criteria that firms with over £4 billion of total assets must meet (Chapter 3);
- remove the requirement for smaller, less complex dual-regulated firms to apply the rules on malus and clawback (Chapter 3);
- align some minor differences between the FCA’s rules and the PRA Rulebook, including those relating to the identification of dual-regulated firms Remuneration Code staff (Chapter 4); and
- make corresponding changes to the FCA’s non-Handbook guidance.
The regulator proposes that firms can apply the amended remuneration rules and guidance in Chapter 3 to remuneration awarded in respect of their next performance year that begins on or after publication of the relevant policy statement. The FCA’s amended remuneration rules and guidance in Chapter 4 will come into force immediately following publication of the relevant policy statement.
Responses to the consultation are due by 9 June 2023. The FCA plans to publish its related Policy Statement and final rules and guidance in Q4 2023.
FCA Consultation Paper (CP23/11**): Remuneration: Enhancing proportionality for dual-regulated firms
Press release
Cost of living - FCA publishes findings from Financial Lives Survey - 17 May 2023
The FCA has published a summary of findings from its most recent Financial Lives survey focused on the consumer experience of the rising cost of living. The survey was carried out between December 2022 and January 2023, and seeks to give an insight into the financial situation that UK adults experienced over the 6 months to January 2023.
In a summary of its findings, the FCA notes:
- the number of adults who missed payments on any domestic bills or failed to meet any of their credit commitments in 3 or more of the previous 6 months went up by 1.4 million;
- 29% of UK adults with a mortgage and 34% of renters experienced payment increases;
- of UK adults who were insurance or protection policyholders in May 2022, 8% cancelled one or more of their policies, and 7% reduced the level of cover on one or more their policies, specifically to save money due to the rising cost of living; and
- the toll on mental wellbeing was described by the FCA as “considerable”, with just over 1 in 2 UK adults (28.4 million people) feeling more anxious or stressed due to the rising cost of living.
The FCA plans to publish the full Financial Lives 2022 survey report later in 2023.
Financial Lives January 2023: Consumer experience of the rising cost of living
Updated webpage
Press release
Non-bank financial intermediation - FCA publishes speech on drive for data - 16 March 2023
The FCA has published a speech delivered by Ashley Alder, Chair of the FCA, on the drive for data in non-bank financial intermediation (NBFI). Points of interest in the speech include:
- regulators and market participants have access to lots of data to assess risks in the open-ended fund, money market funds and central counterparty segments of NBFI. However, they don’t have enough data to measure key risks in private investments and funding markets;
- the priority for NBFI regulation should be a global effort to improve the data needed to enable regulators to spot risks in private markets and supervise them credibly. Mr Alder notes that the key point is that opaque markets exhibit vulnerabilities which make it hard to spot and contain problems, including those that may give rise to broader financial crises; and
- these vulnerabilities include very limited or fragmented regulatory coverage of firms and activities, as well as a lack of risk data being reported to regulators or being made available to the market.
Addressing these issues, Mr Alder notes that “it is clear action is needed” by enhancing reporting from NBFIs, while being conscious of the burden on firms and confidentiality issues for public reporting. Better frameworks to assess leverage, both hidden and synthetic, are needed. In addition, he notes that NBFI entities should more fully disclose relevant exposures to prime brokers, banks and other regulated firms providing finance or acting as derivative counterparties. NBFI disclosures should allow banks to assess accurately levels of leverage and concentration risks among their clients.
FCA Speech: The drive for data in non-bank financial intermediation
Financial Ombudsman Service
Handling discrimination complaints - FOS publishes new webpage - 17 May 2023
The Financial Ombudsman Service (FOS) has published a new webpage and accompanying blogpost on financial businesses' responsibilities regarding handling complaints involving discrimination.
The webpage notes the prevalence of complaints from individuals who claim to have been treated differently due to a protected characteristic under the Equality Act 2010. The page outlines: (i) the FOS's approach to assessing complaints; (ii) case studies; (iii) guidance for businesses on managing complaints; and (iv) how consumers can lodge complaints with the FOS. In particular, the FOS advises businesses to:
- conduct a fair, impartial and thorough investigation when handling discrimination complaints;
- be mindful of unconscious bias; and
- respond sensitively to the complainant.
Webpage
Blog post: Tackling complaints about discrimination
