FCA extends UK crypto-asset business registration deadline until 2022
The need for UK crypto-asset service providers to register with the FCA was introduced on 10 January 2020, when the government transposed the EU Fifth Anti-Money Laundering Directive into domestic law. The transposing instrument made crypto-asset businesses subject to the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, with the FCA as supervisor.
Crypto-asset businesses already in existence at that date were offered a temporary registration regime that entitled them to continue to trade until 9 July 2021, provided they had applied for registration with the FCA before 16 December 2020. New crypto-asset firms that were not operating before January 2020 are required to register with the FCA before they begin business.
However, an unprecedented number of businesses have withdrawn their applications from the registration system because they were unable to meet the standards required, according to the FCA. It says it will register firms only where it is confident that processes are in place to identify and prevent money laundering activity, although it is also concerned about consumers losing money by investing in crypto-assets, since the agency has no powers to supervise service providers' protection of client accounts or to monitor the advice they give.
In April, law firm Mishcon de Reya obtained a Freedom of Information Act 2000 response from the FCA showing that only four UK crypto-asset businesses have succeeded in obtaining registration. Of the 209 applications made to the FCA since January 2020, most of which are from new applicants, 39 applications had been withdrawn, usually where the FCA has told the firms they are unlikely to succeed. The other 166 remain outstanding, although the regulations state that FCA decisions should be made within three months of the date of application.
The FCA has now announced that it is extending the end date of the temporary registrations regime for existing crypto-asset businesses from the previous date of 9 July 2021 to 31 March 2022. This will allow crypto-asset firms to continue trading while the FCA continues with its assessments.
However, Mishcon notes that crypto-asset firms do not need to be authorised by the FCA in order to operate, only to be registered by it, and the only requirement for registration under the Money Laundering Regulations is that applicants should be 'fit and proper'. This requires an assessment of the regulatory history of the firm, its officers and beneficial owners, an assessment of the risk that the business may be used for money laundering or terrorist financing and whether the firm and its staff have adequate skills and experience.
In implementing the regulations, the FCA is however also requesting that applicants provide a ‘long and detailed list of documents and information,’ says Mishcon. As well as anti-money laundering (AML) policies and procedures, this includes a business plan, marketing plan, details of IT systems, policies and procedures, three-year budget forecasts and financials, among other documents: a process that has turned out to be difficult for firms.
Mishcon cites an open letter sent by crypto-asset trade association Crypto UK to the Chancellor of the Exchequer in March 2021, arguing that the registration regime was meant only to ensure crypto-asset firms implement and adhere to financial industry standard AML practices.
The content displayed here is subject to our disclaimer. Read more