The UK government is taking further measures to tackle economic crime in the UK, reforming its corporate register, and giving extra powers to the Serious Fraud Office.

By Stuart Alford KC, Clare Nida, and Mair Williams

The UK has published the new Economic Crime and Corporate Transparency Bill 2022 (the Bill), which focuses on reforms to Companies House, the role of limited partnerships, seizure of suspected criminal cryptoassets, and new intelligence gathering powers for law enforcement.

In March 2022, the Economic Crime (Transparency and Enforcement) Act 2022 (the Act) created a new register of overseas entities holding UK property assets alongside changes to the unexplained wealth order and sanctions regimes (see previous Latham blog). The Act was passed in response to the Russian invasion of Ukraine and targeted Russian assets held or flowing through the UK. At the time of the Act in March, the UK government said a second part would follow, and the Bill, published in September 2022, sets out the plans for that second part.

Assertive regulators are bringing greater clarity and new challenges as they step up oversight of fintech innovation.

By Stuart Davis, Tom D. Evans, Nicola Higgs, Christian F. McDermott, David J. Walker, Brett Carr, Catherine Campbell, and Charlotte Collins

As the fast-growing fintech industry thrives, the sector has begun to attract greater regulatory scrutiny. We expect new legal and regulatory focus and oversight of those players operating on the unregulated perimeter of financial services.

While the level of supervision is set to increase and pose challenges for industry participants, a more robust regulatory environment could play into the hands of PE buyers and create opportunities for portfolio companies best able to navigate this rising regulation. In our view, PE firms must pay heed to the tone of more assertive regulators, but that approach coupled with new regulation will create a space in which firms in nascent fintech verticals can legitimately pursue their aims with greater certainty, no longer looking over their shoulders.

While the UK government is keen to stress that the new regulation will be applied proportionately, proposals are likely to result in the redirection of resources and attention of firms, and buyout firms should remain alert to changes that may impact a range of fintech investments.

Regulatory guidance on cryptoassets and digital currency companies may lead to a legitimisation of crypto-businesses as an investable asset class.

By Stuart Davis, Sam Maxson, David Walker, Tom Evans, and Catherine Campbell

Recent and upcoming regulatory guidance on cryptoassets and the regulation of companies engaged in digital currency, such as issuers, crypto-exchanges, crypto-custodians, crypto-brokers, and other service providers, could help facilitate private equity investment in this space. While there has been some institutional investment in crypto-businesses — such as Goldman Sachs’ investment in Circle (owners of the Poloniex crypto-currency exchange) and Tiger Global’s investment in Coinbase — this has been a relatively nascent market with most money coming in the form of early-stage and venture investing.

Click for larger image.

Drivers of Volatility in Cryptoassets Values

Regulatory uncertainty has been a key driver in dampening the market value of cryptoassets. Regulators around the globe have issued warnings that cryptoassets may be regulated financial instruments, and issuers and intermediaries may require licences. Further, the application of AML/KYC rules to cryptoassets has been unclear.

The Strategy emphasises the UK government’s continued push to create a world-leading FinTech sector.

By Stuart Davis, Charlotte Collins and Sam Wong

At the second International Fintech Conference held on 22 March 2018, Philip Hammond, Chancellor of the Exchequer, announced the launch of the UK’s first Fintech Sector Strategy. The Strategy includes the following key measures:

  • A new Cryptoassets Task Force — consisting of HM Treasury, the Bank of England, and the Financial Conduct Authority (FCA) — will be set up to help the UK manage risks relating to cryptoassets and to harness potential benefits of the underlying technology.
  • “Robo-regulation” pilot schemes will be developed to assist regulated firms in complying with regulation, by creating software that would automatically ensure regulated firms follow the relevant rules. It is hoped this will help reduce compliance costs for newer and smaller firms, who are often disproportionately burdened, as well as potentially improving the accuracy of data submissions.