The future of the financial world from a regulatory perspective

Jean-Claude Spillmann
Partner und Head Asset & Wealth Management and Banking Regulatory, PwC Switzerland

Philipp Rosenauer
Partner und Head Data Privacy, ICT und Implementation, PwC Switzerland

On 9 May 2023, the Finance Forum Liechtenstein took place in Vaduz under the title “The financial world of the future” and featured renowned speakers from the world of finance, politics and society.

In a workshop entitled “The future of the financial world from a regulatory perspective”, two partners at PwC Switzerland, Philipp Rosenauer and Dr Jean-Claude Spillmann, highlighted current regulatory developments in the areas of the Financial Markets Directive II (MiFID II)/Financial Markets Regulation (MiFIR), the Regulation on Markets in Crypto-Assets (MiCA) and the Regulation on European Long-Term Investment Funds (ELTIF).

Since the financial crisis, the financial world has been flooded by one regulatory project after another. Financial institutions can hardly catch their breath between projects to implement the numerous new regulatory requirements. The three new regulatory packages mentioned above exemplify how complex and simultaneously different the various requirements are – and how deregulation projects can sometimes be found in addition to new regulations.

While the goal of the MiFID II/MiFIR reform and MiCA is to improve the stability and efficiency of the European financial markets and to strengthen client protection – in the case of the MiFID II/MiFIR reform by adapting or improving existing regulations and in the case of the MiCA by creating a new regulation – the ELTIF reform aims to improve access to financing for small and medium-sized enterprises through targeted deregulation.

Liechtenstein’s financial industry and the corresponding institutions are also affected by these regulatory changes and would do well to analyse the associated opportunities and risks.


Revision of MiFID II and MiFIR – innovations to strengthen market transparency

On 25 November 2021, the European Commission published the long-awaited proposals to amend MiFID II and MiFIR as part of the Capital Markets Union. On the one hand, the transparency and availability of market data is to be improved in order to strengthen the position of retail investors. On the other hand, the competitive conditions between the execution venues are to be improved and the international competitiveness of EU market infrastructures is to be ensured. The final legislative text is expected to be available by the end of the third quarter of 2023.

The MiFID II and MiFIR reforms will introduce many new changes and financial institutions are well advised to reactivate their expert groups for this topic area. While the amendments to MiFID II are primarily aimed at ensuring consistency with the amendments to MiFIR, the latter are quite significant and cover various areas. In addition, the draft regulation foresees various Level 2 measures.

The introduction of a single consolidated tape provider (CTP) is a key change of the MiFIR reform. It will introduce a central database for each asset class (shares, bonds, ETFs and derivatives) that will provide an overview of regulatory and core market data to market participants through a continuous electronic live data stream. The aim is to improve price transparency across trading venues.

In addition, the draft regulation introduces a ban on payment for forwarding client orders for execution (PFOF). The draft of the MiFIR proposes that investment firms acting on behalf of the client shall not receive any fee, commission or non-monetary benefits from any third party for forwarding client orders to such third parties for execution.

Finally, the limitation of anonymous trading is another notable change introduced by the MiFIR reform. In that context, the draft regulation replaces the double volume cap with a single volume cap by abolishing the trading venue-specific threshold. The new single volume cap is based exclusively on the EU-wide threshold of 7%.

Other important regulatory developments related to the Capital Markets Union are the revision of existing guidelines of the European Securities and Markets Authority and the EU Retail Investor Strategy. The European Commission adopted the Retail Investment Package on 24 May 2023. The main objective of the EU Retail Investor Strategy is to take a holistic view of investor protection rules in order to assess the entire retail investor journey and put the investor at the heart of EU policies in the spirit of “an economy that works for the people”.

MiCA – new European regulation for crypto-assets

The MiCA is part of the European Digital Finance Package, which includes the MiCA and Digital Operational Resilience Act (DORA) regulatory packages alongside a Digital Finance Strategy and a renewed Retail Payments Strategy.

The starting signal for the MiCA was given in 2018 when there was a big upswing in initial coin offerings (ICO). As a result, numerous regulations took effect like the FINMA Guideline on ICOs in Switzerland or the Tokens and VT Service Providers Act (TVTG) in Lichtenstein. Subsequently, on 24 September 2020, the European Commission presented the MiCA proposal, which aimed to harmonise regulation in the crypto sector at the European level and will have a significant impact on crypto service providers both within and outside the EU. The MiCA is expected to come into force in the second half of 2023 or at the beginning of 2024.

In principle, the MiCA regulation seeks to define a uniform legal framework within the EU and the European Economic Area for those crypto-assets and service providers that are not already covered by the existing European financial market regulations. It aims to protect investors and consumers, promote the development and use of distributed ledger technology (DLT), and ensure financial stability.

The MiCA regulates services related to crypto-assets such as the custody and management of crypto-assets for third parties or the operation of a trading platform for crypto-assets as well as the issuance of crypto-assets. In addition, the MiCA contains specific rules to prevent market abuse such as the disclosure of insider information, a ban on insider trading, a ban on the unlawful disclosure of insider information, and a ban on market manipulation. The relevant rules are important to protect the integrity of crypto markets and to protect consumers.

ELTIF reform – a new start

The original ELTIF regulation has been in force since 2015. The European Commission published a proposal to amend the ELTIF regulation on 25 November 2021. The European Parliament voted on the final text on 15 February 2023 and the Council formally adopted the new regulation on 7 March 2023. The revised ELTIF regulation entered into force on 8 April 2023 and will be applicable from 10 January 2024.

An ELTIF is intended as a means of funding companies and projects in need of long-term financing. The financed companies must have a positive economic or social impact on the EU. The ELTIF allows for non-bank financing in the areas of infrastructure, private debt, private equity, and real estate. It typically allows for long-term and stable returns thanks to its investment focus and broader risk diversification. As the ELTIF can also be opened to retail investors, it needs to ensure adequate investor protection by compensating the typical risks of long-term and illiquid assets with a comprehensive regulatory framework.

Since its introduction in 2015, the number of authorized ELTIFs developed rather slowly. Until the end of 2022, there were 77 authorized ELTIFs with assets under management of approximately EUR 11.3 billion. One of the reasons why the ELTIF regulation has not been more successful yet is the rather restrictive investment policy and the respective investment restrictions. Market participants also criticised the current regulation for the rather high hurdles it set for private invenstors, for example, a required minimum investment and upper limit in terms of their private wealth, requirements for a separate suitability test respectively investment advice, and a local institution serve as a contact partner. In addition, the long investment horizon with limited exit options was considered particularly unpopular by private investors.

With the amended text, these and further points of criticism are now to be addressed and deregulated. The draft regulation expands the investment spectrum and makes it easier for private investors to invest in ELTIFs. It also introduces significantly relaxed diversification rules and allows for new options in terms of master-feeder or fund-of-funds structures. Furthermore, it offers the possibility of so-called “de facto open-ended” ELTIFs which will allow redemption of the units under certain conditions.

How can we support you?

Would you like to gain a better understanding of how the MiFID II/MiFIR revision, the MiCA or the ELTIF reform will impact your business? Please don’t hesitate to contact us.


How can we support you?

Would you like to gain a better understanding of how the MiFID II/MiFIR revision, the MiCA or the ELTIF reform will impact your business? Please don’t hesitate to contact us.



Contact us

Dr. Jean-Claude Spillmann

Dr. Jean-Claude Spillmann

Partner, Head Asset & Wealth Management and Banking Regulatory, Legal, PwC Switzerland

Tel: +41 58 792 43 94

Philipp Rosenauer

Philipp Rosenauer

Partner Legal, PwC Switzerland

Tel: +41 58 792 18 56