Greg Kilminster
Head of Product - Content
UK Treasury charts path for digital asset innovation
Tulip Siddiq, Economic Secretary to the UK Treasury, used her address at the City and Financial Global Tokenisation Summit to reaffirm the UK’s ambition to lead in digital asset adoption. Highlighting the nation’s financial services as a “jewel in the crown of our economy,” Siddiq emphasised the sector’s role in driving economic growth and its proven capacity for embracing innovation.
Siddiq argued that emerging technologies such as distributed ledger technology (DLT) could profoundly reshape financial markets and that the UK must actively support this transformation: “If we are to maintain the UK’s position as a leading financial services hub, we need to lean in to the emerging and disruptive technologies that could change our industry dramatically in the coming years.”
Pioneering tokenisation and securities innovation
The Treasury has taken bold steps to integrate DLT into UK capital markets, notably through the Digital Securities Sandbox, launched in September 2024. This initiative enables firms to conduct real transactions on DLT platforms in a live environment, with close oversight by regulators. Siddiq described it as “a fantastic example of what we can achieve when government, regulators and industry work together.”
In a new development, the Chancellor announced plans to issue a Digital Gilt Instrument (DIGIT) within the sandbox. Siddiq explained that this pilot project would allow the government to explore DLT’s potential in debt issuance and encourage the development of DLT infrastructure across capital markets. She noted: “This is a hugely significant milestone, one which demonstrates our support for DLT innovation and signifies that the UK intends to lead the world in digital assets adoption.”
The Treasury’s efforts are complemented by the Digital Assets Bill, introduced to clarify property rights for digital assets, and a broader review of innovations in areas such as asset management, spearheaded by the Asset Management Taskforce’s Technology Working Group.
Integrating traditional finance with crypto
Siddiq highlighted the growing synergy between traditional financial services and cryptoassets. She stressed that the two should not be viewed as separate domains but as complementary elements with mutual benefits. For example, she noted that securities tokenisation could enable “atomic settlement,” where the payment and transfer of ownership occur simultaneously. Achieving this efficiency, she added, would require blockchain-based settlement instruments, such as stablecoins or potentially tokenised central bank money.
Recognising cryptoassets’ lasting presence, Siddiq pointed out their rising ownership rates and noted recent surges in market activity. She acknowledged their role in proving the broader potential of blockchain technology, stating: “It is clear that cryptoassets are here to stay.”
Moving forward with cryptoasset regulation
The Treasury plans to implement a comprehensive regulatory framework for cryptoassets, including activities such as operating crypto trading platforms and issuing stablecoins. These proposals, published in October 2023, are set to proceed in full. The government will also introduce safeguarding requirements for stablecoin custody to address associated risks.
However, Siddiq clarified that stablecoins will not yet fall under UK payments regulation, as the market has evolved more gradually than expected. This decision, she argued, ensures that regulation remains proportionate and does not restrict future innovation. “That means not regulating innovative propositions such that they become restricted to specific use-cases, when the market might find further, equally valid use-cases in future.” she said.
Addressing concerns about crypto staking services being classified as Collective Investment Schemes under current law, Siddiq confirmed that the government intends to remove this uncertainty, aligning these services with the forthcoming regulatory framework: “It doesn’t make sense for staking services to have this treatment… The heavy lifting has been done, so we’re full steam ahead on this now.”
Building certainty for the future
Siddiq closed her speech by underscoring the importance of collaboration between government, regulators, and industry to unlock the full potential of blockchain technology and tokenisation. She promised early engagement with stakeholders on draft provisions for the cryptoasset regime and emphasised the need for a coherent, joined-up regulatory approach: “We need to tie the threads together properly… ensuring a coherent joined-up approach across UK authorities, so that firms have the certainty to invest and grow, as well as the space and flexibility to innovate.”
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SEC's Sanjay Wadhwa emphasises compliance culture and targeted enforcement
In a speech at the Program on Corporate Compliance and Enforcement Annual Fall Conference, Sanjay Wadhwa, Acting Director of the SEC's Division of Enforcement, reflected on the Division's enforcement results for fiscal year 2024 and outlined the twin themes underpinning the agency’s approach: robust enforcement and fostering a culture of compliance among market participants.
Enforcement results for FY 2024
The SEC filed 583 enforcement actions in the fiscal year 2024, including 431 standalone cases—a 14% decrease from the prior year. Wadhwa acknowledged the drop but cautioned against interpreting it solely as a decline in activity, highlighting the Division's broader impact on investor protection. He noted too that some investigations had spurred behavioural change without formal enforcement.
Wadhwa attributed part of the decline to improved compliance: “We did not expect to continue to announce record numbers every year because we expected behaviours to change, we expected compliance. I think that is part of what we’re seeing.”
Complementary themes: enforcement and compliance
Wadhwa stressed that robust enforcement and fostering compliance are interconnected goals. Enforcement serves as a deterrent, reducing incentives for non-compliance, while a strong compliance culture decreases the need for enforcement actions.
He pointed to a deliberate recalibration of penalties since 2021, designed to ensure they are not merely an acceptable cost of doing business: “We recommended enforcement actions resulting in Commission orders for record penalties over the past several years.” At the same time, the SEC has rewarded cooperation, self-reporting, and remediation, which Wadhwa described as critical to investor protection: “It increases investor trust and promotes market integrity; it helps maintain fair, orderly, and efficient markets; and it helps facilitate capital formation.”
A measured use of penalties
Wadhwa highlighted the dual approach of imposing robust penalties to ensure accountability while offering leniency to those demonstrating proactive compliance measures. This strategy has spurred firms across various cases—including cybersecurity failures, fraud, and material misstatements—to self-report and cooperate: “This illustrates that robust enforcement is good for markets because it fosters a culture of compliance among market participants and promotes investor confidence.”
Civil penalties, Wadhwa noted, are deployed strategically to protect investors and signal the importance of robust compliance programmes.
Looking ahead
Concluding his remarks, Wadhwa commended market participants who have embraced compliance and expressed optimism about continuing this collaborative approach: “I am very pleased that many market participants have in fact stepped up their compliance functions to embrace our shared mission of protecting investors.”
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Bank of England report highlights rise of AI in UK financial services
A new report by the Bank of England has revealed that artificial intelligence (AI) is being widely adopted across the UK financial services sector. The report, titled "Artificial intelligence in UK financial services: 2024", found that 75% of firms are already using AI in some form, with a further 10% planning to do so within the next three years.
The report highlights the benefits that AI can offer to financial institutions, including improved data analysis and insights, enhanced anti-money laundering (AML) and fraud prevention capabilities, and stronger cybersecurity. However, the report also identifies a number of potential risks associated with the use of AI, including concerns around data privacy and protection, data quality, data security, and data bias.
The Bank of England's report is a timely reminder of the transformative potential of AI in the financial services industry. As AI technology continues to develop, it is likely to play an increasingly important role in shaping the future of finance.
Key findings of the report
- 75% of UK financial services firms are already using AI in some form.
- A further 10% of firms are planning to use AI within the next three years.
- The highest perceived benefits of AI are in data and analytical insights, AML and fraud prevention, and cybersecurity.
- The top five perceived risks associated with AI are all data-related: data privacy and protection, data quality, data security, and data bias.
The Bank of England's report makes a number of recommendations to help ensure that AI is used safely and effectively in the UK financial services sector.
These recommendations include:
- Financial institutions should develop clear and comprehensive AI governance frameworks.
- Firms should invest in data quality and management practices.
- There is a need for greater transparency and explainability of AI models.
- Regulatory frameworks should be adapted to keep pace with the development of AI.
The adoption of AI in UK financial services is viewed as a positive development, but it is important to be aware of the potential risks involved. By following the recommendations set out in the Bank of England's report, financial institutions can help to ensure that AI is used for good and that the UK remains at the forefront of financial innovation.
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Australia consults on expanding consumer data right to non-bank lending
The Australian Treasury has released updated draft amendments to expand the Consumer Data Right (CDR) to non-bank lending while narrowing its scope in banking. These changes, part of a broader initiative to encourage innovation and streamline compliance, aim to enhance consumer engagement with financial products and improve financial outcomes.
Some context
The CDR framework, introduced to give consumers greater control over their data, has primarily focused on the banking sector. In 2023, draft amendments proposed extending CDR to non-bank lenders. Following feedback on potential compliance costs and data sharing concerns, the Treasury has refined its approach, and the final rules are expected to be implemented gradually, beginning in 2026.
Key takeaways
- Updated thresholds for non-bank lenders
- Non-bank lenders must comply with CDR obligations if their total loans exceed AUD 1 billion (up from AUD 500 million) or they serve over 1,000 customers (up from 500).
- Clarifications have been made regarding obligations for loan managers and related entities.
- Narrower scope for data sharing
- CDR data sharing will be voluntary for niche products such as reverse mortgages, consumer leases, and margin loans.
- Data holders with fewer than 1,000 eligible consumers for specific products are exempt from mandatory data sharing.
- Reduced historical data requirements
- Banking and non-bank lending data holders will no longer need to share transactional data older than two years, focusing instead on recent, high-value data.
- Staggered implementation
- CDR obligations for non-bank lenders will begin with product data sharing in mid-2026, followed by consumer data sharing in phases from November 2026 to September 2027.
- Larger lenders and simpler data requests will be prioritised during the rollout.
- Flexibility for stakeholders
- Stakeholders are encouraged to provide input on the updated rules, including identifying products that may warrant voluntary data sharing.
Next steps
The Treasury is accepting feedback on the updated draft until 24 December 2024. The consultations will shape the final implementation, ensuring the CDR framework remains practical and effective.
By refining the scope and balancing innovation with compliance costs, the government seeks to advance Australia’s data-sharing framework, fostering consumer trust and market efficiency.
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FCA fines Barclays £40m for 2008 Qatari deals
The Financial Conduct Authority (FCA) has fined Barclays £40 million for failing to disclose certain arrangements with Qatari entities during its October 2008 capital raising. The fine follows Barclays’ decision to withdraw its referral of the FCA’s enforcement action to the Upper Tribunal.
Some context
The FCA’s investigation into Barclays began in 2013 but was paused during criminal proceedings initiated by the Serious Fraud Office (SFO). Following the SFO’s dismissal of charges and acquittals of other parties involved, the FCA resumed its case, issuing decision notices in October 2022. Barclays initially contested the FCA’s decision to impose a £50 million fine by referring the matter to the Upper Tribunal, an independent appeals body.
The events in question occurred during a period of financial instability when banks sought emergency recapitalisation to navigate the global financial crisis. The FCA has since highlighted its objective of ensuring market integrity and the critical importance of transparency during such significant transactions.
Key takeaways
- Fine reduced from £50m to £40m: The FCA initially planned a higher penalty but acknowledged Barclays’ decision to settle.
- Recklessness in disclosure: The FCA found Barclays’ conduct during the 2008 capital raising to be reckless, lacking the integrity required for such high-stakes activity.
- Historical misconduct: While recognising the severity of the misconduct, the FCA noted that these events occurred over 16 years ago and under significant market pressure.
Steve Smart, joint executive director of enforcement and market oversight at the FCA, commented: "Barclays’ misconduct was serious and meant investors did not have all the information they should have had. However, the events took place over 16 years ago, and we recognise that Barclays is a very different organisation today, having implemented change across the business."
Next steps
Barclays has acknowledged the fine, and the case is now resolved. The FCA emphasised that listed companies must prioritise transparency and provide investors with complete information, particularly during high-pressure financial events. This case serves as a reminder of the long-term importance of market integrity and robust corporate governance.
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FinCEN joins forces to combat fraud and scams
The Financial Crimes Enforcement Network (FinCEN) has announced its participation in a national task force aimed at preventing fraud and scams. The initiative, led by the Aspen Institute’s Financial Security Program, brings together a diverse range of stakeholders including financial institutions, technology companies, consumer advocates, and government agencies.
By joining the task force, FinCEN aims to strengthen its efforts in combating financial crime, particularly in the areas of anti-money laundering and counter-terrorism financing. The agency will contribute to the development of a comprehensive national strategy to address fraud and scams, leveraging its expertise in financial intelligence and regulatory oversight.
The collaboration between public and private sector entities is significant in addressing the evolving landscape of fraud and scams. By sharing information, best practices, and resources, the task force can enhance detection, prevention, and response efforts.
FinCEN's involvement emphasises its commitment to protecting consumers and the financial system from illicit activities. Through its participation in the task force, the agency aims to contribute to a safer and more secure financial environment.
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