Quantum Updates 44 | May 2025

UK Finalises First Full-Spectrum Crypto Regulatory Regime Under UK FSMA: Treasury, UK FCA and Parliament Align on Authorisation and Compliance in 2025

On 29 April 2025, the United Kingdom Government along with UK Financial Conduct Authority (UK FCA) and UK Treasury Department, in furtherance of the UK Crypto Roadmap, completed a milestone shift in Crypto asset regulation and published its first draft bill for cryptoassets under the Financial Services and Markets Act 2000 (FSMA); policy note and discussion paper. In a coordinated release, HM Treasury published the Draft Financial Services and Markets Act 2000 (Regulated Activities and Miscellaneous Provisions) (Cryptoassets) Order 2025, Parliament was formally notified, the Policy Note on the Future Financial Services Regulatory Regime for Cryptoassets (Regulated Activities), issued alongside the draft Order; and the UK Financial Conduct Authority (UK FCA) published discussion paper, DP25/1. Together, these instruments establish a full-spectrum, activity-based regulatory regime, signalling the UK’s transition from an AML-focused registration model to a dedicated authorisation and supervision structure for digital asset activities.

• The Draft RAO SI 2025 amends the Regulated Activities Order 2001 to bring seven crypto-related functions within FSMA’s regulated perimeter, including custody, dealing, trading platforms, stablecoin issuance, arranging, and staking.
• Legal definitions for “qualifying cryptoassets” and “qualifying stablecoins” have been introduced, supported by a phased commencement mechanism to enable regulatory readiness and industry adaptation.
• The UK Treasury Policy Note explains the rationale for embedding crypto regulation within the FSMA architecture rather than introducing standalone legislation, reaffirming the government’s preference for structural coherence and institutional alignment.
• Functional exclusions include token minting, group-based loyalty schemes, and decentralised models without identifiable operators, unless those activities are carried out “by way of business” in the UK.
• The UK FCA’s discussion paper DP25/1 sets out proposed authorisation standards and regulatory expectations for cryptoasset trading platforms (CATPs), custodians, intermediaries, and staking service providers.
• Proposed rules include bans on conflicted proprietary trading, enhanced trade transparency, asset segregation, and layered obligations for custodial and liquid staking, applying to both domestic and overseas firms engaging UK clients.
• The framework provides for future compliance pathways for crypto firms, investors, and stakeholders.
• Advancing UK FCA’s Crypto Roadmap, this regulatory shift replaces the limited Money Laundering Regulations regime to bespoke UK FSMA-governed authorisation model.

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United Kingdom Financial Conduct Authority Announces Board Appointments to Support 5-Year Vision

On 29 April 2025, the Chancellor of the Exchequer confirmed four new non-executive appointments to the Board of the United Kingdom Financial Conduct Authority (UK FCA), strengthening the institution’s leadership bench as it advances its five-year strategic vision centred on regulatory agility, market resilience, and innovation.

• Professor Julia Black, will join as non-executive director on 12 May 2025 for a three-year term.
• Anita Kimber, will also assume office on 12 May 2025, contributing deep sectoral expertise in fintech and digital innovation.
• John Ball, will join the Board on 27 May 2025 for a three-year term, reinforcing the UK FCA’s focus on retirement and long-term financial outcomes.
• Stéphane Malrait, will join office on 20 October 2025.
• Richard Lloyd, will chair the Policy and Rules Committee, with one-year extension to his current term.
• The appointments were made under the Unitted Kongdom Financial Services and Markets Act 2000 and are governed by the Office of the Commissioner for Public Appointments, with all selections based strictly on merit.

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United States Securities and Exchange Commission Acknowledges Immediate Effectiveness of FICC’s Proposed Rule Change to Amend Capital Policy and Replenishment Plan

On 5 May 2025, the United States Securities and Exchange Commission (US SEC) published a notice confirming the immediate effectiveness of a proposed rule change by the Fixed Income Clearing Corporation (FICC), filed on 25 April 2025 pursuant to Section 19(b)(3)(A) of the United States Securities Exchange Act of 1934 and US SEC Rule 19b-4(f)(3). The rule change revises FICC’s internal Capital Policy and Capital Replenishment Plan, governance documents also applicable to its affiliated entities, The Depository Trust Company (DTC) and the National Securities Clearing Corporation (NSCC), collectively known as the Clearing Agencies, streamlining language, reinforcing process integrity, and enabling capital continuity even in times of operational disruption.

• The updated rule applies exclusively to internal governance frameworks and became effective immediately upon filing, without triggering a mandatory public comment period.
• The revised Capital Policy clarifies how Clearing Agencies maintain Liquid Net Assets (LNA) funded by equity to meet General Business Risk Capital Requirements.
• Capital requirements under the policy are assessed as the highest value among three benchmarks: a risk-based capital estimate, a recovery/wind-down cost, and a six-month operating expense reserve.
• The Capital Policy also includes a Corporate Contribution, an additional capital buffer earmarked for credit risk scenarios, aligned with Rule 17ad-22(e)(4) and (e)(7) of the Securities Exchange Act.
• Amendments to the Capital Replenishment Plan introduce alternate authorisation provisions under Section 3.2, enabling designated backup officers to approve capital restoration actions during staffing gaps or emergencies.
• The Capital Replenishment Plan, originally adopted in 2017 and governed by US SEC Rule 17ad-22(e)(15), outlines procedures to restore equity capital following depletion due to general business losses.
• FICC affirmed that the amendments are administrative and governance-focused in nature, and will not affect market participants, competition, or the broader operational framework.
• No public objections or comments were recorded during the filing period, supporting the procedural clarity and uncontroversial nature of the changes.
• Despite its immediate effect, the rule change remains subject to suspension by the US SEC within 60 days if deemed necessary for investor protection or the public interest, under the United States Securities Exchange Act.

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United States Securities and Exchange Commission Invites Public Comment on Blackstone Co-Investment Relief Application under the United States Investment Company Act of 1940

On 5 May 2025, the United States Securities and Exchange Commission (US SEC) issued a public notice regarding an application for exemptive relief submitted by a consortium of Blackstone-affiliated investment funds and advisory entities. Filed under Sections 17(d) and 57(i) of the United States Investment Company Act of 1940 and Rule 17d-1, the application seeks permission for affiliated Blackstone-managed business development companies (BDCs) and closed-end funds to jointly participate in investment opportunities alongside related entities, which would otherwise be restricted as affiliated transactions.

• The application was originally filed on 14 March 2025 and subsequently amended on 11 April and 24 April 2025.
• Relief is sought to allow entities such as Blackstone Private Credit Fund, Blackstone Secured Lending Fund, and other listed affiliates to engage in co-investment transactions in portfolio companies.
• Such joint participation is typically prohibited under Sections 17(d) and 57(a)(4) of the United States Investment Company Act without prior approval from the US SEC.
• The applicants propose that the exemptive relief will improve capital deployment efficiency, enable consistent investment allocation across Blackstone funds, and enhance shareholder outcomes.
• The relief would be conditional on compliance with predefined allocation methodologies and conflict management protocols disclosed in the amended application.
• The US SEC is evaluating the application under Rule 17d-1, which requires that any joint transaction with affiliates must be fair and not detrimental to investor protection or public interest.
• Interested parties are invited to submit comments by email to Secretarys-Office@sec.gov by 30 May 2025, 5:30 PM ET, referencing the file number and providing a certificate of service to the applicant’s legal counsel at Blackstone Inc. and Simpson Thacher & Bartlett LLP.
• The application and its detailed appendices, including proposed safeguards and representations, are available on the US SEC’s EDGAR platform.
• If no hearing is ordered by the stated deadline, the US SEC may grant the requested relief without further notice.
• This proceeding could establish a precedent in how the US SEC regulates co-investment structures involving affiliated alternative credit strategies, and has material implications for fiduciary conduct, compliance governance, and multi-entity portfolio coordination.

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United States Securities and Exchange Commission Seeks Public Comment on Proposed Rule Change to List Leveraged VIX Futures ETFs UVIX and SVIX Under the Securities Exchange Act of 1934

On 5 May 2025, the United States Securities and Exchange Commission (US SEC) published a notice initiating the public consultation process for a proposed rule change filed by Cboe BZX Exchange, Inc. concerning the listing and trading of two leveraged exchange-traded funds (ETFs): the 2x Long VIX Futures ETF (UVIX) and the -1x Short VIX Futures ETF (SVIX). Filed under Section 19(b)(1) of the United States Securities Exchange Act of 1934 and US SEC Rule 19b-4, the application seeks to amend Cboe’s Rule 14.11(f) to accommodate these futures-linked products within the Trust Issued Receipts framework.

• UVIX and SVIX are series of the 2X Futures Access ETF Trust, managed by Volatility Shares LLC, and are designed to deliver 2x and -1x daily returns, respectively, of the Long VIX Futures Index.
• These instruments utilise daily leveraged exposure to futures contracts tied to the Cboe Volatility Index (VIX), and are subject to compounding and rebalancing effects that may cause divergence from the underlying index over time.
• Cboe BZX Exchange, Inc. has proposed rule amendments specifically tailored to list these products, aligning with existing regulations for Trust Issued Receipts under Rule 14.11(f).
• The US SEC has not approved the rule change and is currently soliciting public comment to determine if the proposed listing complies with statutory standards under Section 6(b)(5) of the United States Exchange Act, including investor protection, prevention of fraud, and market fairness.
• The regulatory review is influenced by lessons from the February 2018 “Volmageddon” collapse, in which similar inverse VIX products experienced extreme volatility and losses.
• Key areas for comment include the transparency and structure of leveraged ETFs, suitability for retail investors, disclosure practices, and systemic risk implications.
• The public has 45 days from publication in the Federal Register to submit feedback, after which the Commission will either approve, disapprove, or institute further proceedings regarding the proposed rule change.
• Until formally approved, the rule change remains provisional and does not authorise listing or trading of UVIX and SVIX on Cboe BZX.

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United States Securities and Exchange Commission Unveils Agenda and Panelists for 12 May 2025 Roundtable on Tokenisation and Onchain Finance

On 5 May 2025, the United States Securities and Exchange Commission (US SEC) released the official ‘full agenda and list of panelists’ for its upcoming public roundtable titled “Tokenisation — Moving Assets Onchain: Where TradFi and DeFi Meet”, scheduled on 12 May 2025 from 1:00 p.m. to 5:30 p.m. ET at the US SEC’s Washington, D.C. headquarters. As part of the US SEC’s ongoing efforts to engage constructively with stakeholders in crypto markets, the event will convene crypto industry leaders and stakeholders and prominent figures across financial institutions, academia, and technology to examine the evolving role of tokenisation in transforming capital markets.

• The United States Crypto roundtable will be led by Commissioner Hester M. Peirce and includes opening remarks from Crypto Task Force Chief of Staff Richard B. Gabbert, Chairman Paul S. Atkins, and Commissioners Caroline A. Crenshaw, Mark T. Uyeda, and Hester M. Peirce.
• Commissioner Peirce described tokenisation as a disruptive financial development with transformative potential, highlighting the importance of regulatory alignment with innovation.
• The first session, “Evolution of Finance: Capital Markets 2.0,” will be moderated by Jeff Dinwoodie (Cravath) and will feature executives from Fidelity, Nasdaq, Invesco, Franklin Templeton, BlackRock, Apollo Management, DTCC, SuperState, and the Tokenised Asset Coalition.
• This panel will address the integration of blockchain infrastructure in traditional finance, and how tokenisation is enabling new pathways for asset settlement, issuance, and liquidity.
• The second panel, “The Future of Tokenisation,” will be moderated by Tiffany Smith (WilmerHale), and will feature experts from Chia Network, Robinhood, Canton, Maple Finance, Securitise, Blockchain Capital, and American University Washington College of Law.
• Topics for discussion will include institutional design, cross-border compliance, smart contract infrastructure, and the future trajectory of tokenised instruments across jurisdictions.
• The event will be livestreamed at www.sec.gov and open for public virtual access without registration, while physical attendance will require prior sign-up.

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US SEC Reschedules Crypto Roundtable on “DeFi and the American Spirit” to 09 June 2025

On 5 May 2025, the United States Securities and Exchange Commission (US SEC) announced that its upcoming Crypto Task Force roundtable titled “DeFi and the American Spirit” has been rescheduled from 6 June 2025 to 9 June 2025. The change in schedule was formally confirmed by the Commission, which also noted that all prior registrations will remain valid for the updated date.

• The roundtable forms part of the US SEC’s public dialogue initiative under the Crypto Task Force, aimed at evaluating the evolving regulatory landscape for decentralised finance (DeFi).
• The Crypto Roundtable session will explore how DeFi technologies interact with the principles of US financial regulation, including investor protection, disclosure norms, and jurisdictional boundaries.
• Participants will discuss and evaluate whether decentralised protocols challenge or reinforce the foundational values embedded in American financial law and constitutional federalism.
• The US SEC has invited new attendees to register via its official portal, and will soon release detailed agenda items, discussion topics, and the list of confirmed panelists.

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United States Securities and Exchange Commission Initiates Proceedings on Proposed Listing of Canary Litecoin ETF on Nasdaq

On 5 May 2025, the United States Securities and Exchange Commission (US SEC) published an ‘order instituting proceedings’ to evaluate the proposed rule change by Nasdaq Stock Market LLC for the listing and trading of the Canary Litecoin ETF. Filed under Nasdaq Rule 5711(d) governing Commodity-Based Trust Shares, the application seeks to offer investors regulated access to Litecoin (LTC) price exposure through an exchange-traded fund structure.

• The proposed ETF, sponsored by Canary Capital Group LLC and administered by U.S. Bancorp Fund Services, LLC, would track Litecoin’s market price via the CoinDesk Litecoin Price Index (LTX), holding LTC as its sole underlying asset along with cash.
• Custody of the fund’s Litecoin holdings is to be provided by BitGo Trust Company, Inc. and Coinbase Custody Trust Company, LLC, with ETF shares issued and redeemed in creation units of 10,000 shares, settled in cash.
• The original filing was submitted on 15 January 2025 and is now under formal review under Section 19(b)(2)(B) of the United States Securities Exchange Act of 1934.
• The US SEC has not approved or disapproved the proposal and is seeking public comment to assess whether the rule change satisfies the standards under Section 6(b)(5) of the Exchange Act.
• Key regulatory concerns include the ETF’s capacity to prevent fraud and manipulation, uphold market integrity, and ensure sufficient surveillance-sharing arrangements across trading venues.
• The Commission acknowledged structural similarities between Litecoin and other digital assets like Bitcoin but flagged potential differences in market maturity, liquidity, and volatility that require closer analysis.
• Public comments must be submitted within 21 days of the proposal’s Federal Register publication, with rebuttals accepted within 35 days.
• Interested persons may submit comments via the US SEC’s online portal or by email to rule-comments@sec.gov, referencing File No. SR-NASDAQ-2025-005.
• While no oral hearing is currently scheduled, the US SEC will consider formal requests for such proceedings pursuant to Rule 19b-4.

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US SEC Cancels Registrations of Investment Advisers for Ceasing Operations or Failing to Comply with the Investment Advisers Act

On 5 May 2025, the United States Securities and Exchange Commission (US SEC) issued an ‘Order for cancellation of registrations’ under United States Investment Advisers Act Release No. 6878 cancelling the registration of multiple investment advisers pursuant to Section 203(h) of the United States Investment Advisers Act of 1940. The action was taken against entities that have either ceased providing advisory services or failed to comply with mandatory filing requirements under Rule 204-1 via the United States Investment Adviser Registration Depository (IARD).

• The US SEC exercised its statutory authority under Section 203(h) to ensure that only active, compliant advisers remain on the national investment adviser registry.
• The cancellations aim to preserve regulatory integrity and prevent inactive or non-compliant firms from misrepresenting their registration status.
• Registrations were cancelled for the following entities:
• Stock Markets Institute, Inc.
• TCA Fund Management Group Corp.
• Enier Jose Cabrera
• Brite Advisors Pty Ltd
• Mavros Capital Management, LLC
• PF Advisors LLC
• These firms are no longer authorised to operate as federally registered investment advisers and must immediately cease any advisory activity requiring US SEC registration.
• Any misrepresentation of registration status or continued operation may result in enforcement action under applicable federal securities laws.
• The cancellation order was issued by the US SEC Division of Investment Management under delegated authority and signed by Sherry R. Haywood, Assistant Secretary.

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US SEC Grants Exemption to Monroe Capital Funds Under Section 6(c) of the Investment Company Act; Outlines Legal Path for Share Class Relief

On 6 May 2025, the United States Securities and Exchange Commission (US SEC), through Investment Company Act Release No. 35571, through an order granted a conditional exemption under Section 6(c) of the United States Investment Company Act of 1940 to Monroe Capital BDC Advisors, LLC, Monroe Capital Income Plus Corporation, and Monroe Capital Enhanced Corporate Lending Fund. The exemption permits the issuance of multiple classes of shares with varying fee structures, a flexibility traditionally restricted for business development companies and closed-end funds under the Act’s capital structure and shareholder equality provisions.

• The exemptive relief applies to Sections 18(a)(2), 18(c), 18(i), and 61(a) of the United States Investment Company Act, which limit the issuance of senior securities and require equal treatment among shareholders.
• The application, filed on 04 April 2025, was followed by a public notice on 10 April 2025 (Release No. 35532); no hearing requests were submitted, and no hearing was ordered.
• The exemption permits the creation of multiple share classes that may carry different sales charges and asset-based service or distribution fees.
• The US SEC determined that the exemption is consistent with investor protection, aligned with public interest, and does not compromise the regulatory goals of the United States Investment Company Act.
• The order was issued by the US SEC Division of Investment Management under delegated authority and is effective immediately.
• Section 6(c) authorises the US SEC to exempt any person or transaction from United States Investment Company Act provisions when such action is appropriate and consistent with the Act’s objectives.
• Interested business development companies or closed-end funds may file similar applications under Rule 0-5, identifying the specific provisions from which relief is sought and demonstrating that the exemption will not impair investor safeguards.
• Once an application is complete, US SEC publishes a notice for a typical 25-day public comment period; if uncontested and unchallenged, a final exemption may be granted without a hearing.
• Relief is conditional and tied to representations made by applicants during the filing process; material non-compliance may lead to regulatory consequences, including revocation.

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Hong Kong SFC Deepens Virtual Asset Ties in UAE with Regulatory Dialogue and Web3 Industry Engagement

On 6 May 2025, the Hong Kong Securities and Futures Commission (HK SFC) in furtherance of ASPIRe roadmap initiative concluded visit to Abu Dhabi and Dubai, reinforcing its commitment to global regulatory cooperation in the virtual asset space. The delegation, led by Dr. Eric Yip (Executive Director of Intermediaries) and Ms. Elizabeth Wong (Director of Intermediaries & Head of the Fintech Unit), engaged with senior regulators and industry stakeholders to promote regulatory convergence and enhance Hong Kong’s global standing in digital asset oversight.

• The HK SFC delegation held bilateral meetings with key UAE regulators, including the Securities and Commodities Authority, Abu Dhabi Global Market’s Financial Services Regulatory Authority, the Dubai Financial Services Authority, and Dubai’s Virtual Assets Regulatory Authority.
• Discussions focused on supervisory models, licensing frameworks, and risk mitigation approaches aligned with the SFC’s ASPIRe roadmap for virtual asset regulation, published on 19 February 2025.
• Dr. Yip described the HK SFC’s policy stance as “fit-for-purpose,” designed to balance innovation with investor protection while establishing Hong Kong as a credible financial innovation hub.
• Engagements with leading Web3 and virtual asset industry participants in the UAE revealed a mutual interest in regulatory clarity as a cornerstone for sustainable market development and risk containment.
• The visit is a continuation of Hong Kong’s diplomatic and regulatory outreach strategy, aimed at building international consensus on responsible digital asset governance.
• The ASPIRe roadmap’s pillars are: Advancing clarity, Supporting innovation, Promoting protection, and Reinforcing cooperation, guided the agenda for cross-jurisdictional knowledge sharing.

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