Although he is all behind this change, I gather that he is going to
continue being "in charge".
Well, the Product Owner is technically "in charge", but only when it comes to decide what needs to be done, not how. The PO is the ultimate responsible for the delivery of the product, the "single throat to choke", but that doesn't equate to them making all decisions, especially when it comes to process.
As @Dominik correctly pointed out earlier, your role as Scrum Master includes making sure all team members (including the PO) stay within their role boundaries. The problem, of course, is that he's your boss.
So, how's your relation with him? How much "trust reservoir" have you accumulated so far, so that you can use it to (gently) push back?
Managers in that situation may feel they will loose control of the team, and with that the ability to deliver. You could have a conversation to reassure him that he's not loosing control, but just exercising it from a different angle: rather that making decisions on how the team will do their tasks, he's still in control of what pieces of work get done and in which order.
He also may be making those decisions simply because he is just used to make them in the past. Maybe the solution is as simply as having a conversation showing that the team (with your help as SM) is willing to take care of those aspects of management.
But in more general terms, and going back to your question of "How does one deal with this sort of situation?", the answer is that you're moving into the territory of "crucial conversations" and "principled negotiation", and there's no simple solution for this. However, if you decide to move to the Scrum Master career path, you'll have to get familiar with that sort of "soft skill" topics.
This involves watching for the safety of the conversation ("he's my boss, can I say this?"), moving the conversation from position ("we need to use Jira") to principle ("we need to track our work"), seeking common ground and understanding of problems, etc.
At the end of the day, the Scrum Master and the Product Owner need to work as peers, and that's the problem you're facing, so the solution is not about a technique, special procedure or escalation mechanism, but about building that relationship.