The Financial Conduct Authority (FCA) says many cryptoasset companies are failing to meet money laundering standards.
In a 3 June release extending the registration date for cryptoasset firms, the regulator says, “A significantly high number of businesses are not meeting the required standards under the Money Laundering Regulations”.
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“Many cryptoassets are highly speculative and can therefore lose value quickly,” the FCA warns again.
“Cryptoassets are considered very high risk, speculative investments. If consumers invest in cryptoassets, they should be prepared to lose all their money.”
The FCA requires registration of cryptoasset companies
In January of last year, the regulator began requiring all new businesses (those who started operating after 9 January 2020) to register with the FCA before conducting business.
From 10 January 2020, the FCA became the anti-money laundering and counter terrorist financing (AML/CTF) supervisor for these types of firms, which includes firms that exchange money to and from cryptoassets and those that safeguard their customers’ cryptoassets.
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By GlobalDataFrom this date, ‘existing cryptoasset businesses’ (ie firms operating immediately before 10 January 2020) have had to comply with the Money Laundering Regulations; such firms were required to be registered with the FCA by 10 January 2021.
New businesses (who began operating after 10 January 2020), are required to obtain full registration with the FCA before conducting business.
The Temporary Registration Regime is for existing cryptoasset businesses which have applied for registration before 16 December 2020, and whose applications are still being assessed.
This is to enable those existing businesses to continue to trade after 9 January 2021 until 9 July 2021, pending the FCA’s determination of their application.
The FCA is now extending temporary registration date
The FCA is extending the end date of the Temporary Registrations Regime (TRR) for existing cryptoasset businesses from 9 July 2021 to 31 March 2022.
The TRR was established last year to allow existing cryptoasset firms that applied for registration before 16 December 2020, and whose applications are still being assessed, to continue trading.
A significantly high number of businesses are not meeting the required standards under the Money Laundering Regulations. This has resulted in an unprecedented number of businesses withdrawing their applications.
The extended date allows cryptoasset firms to continue to carry on business while the FCA continues with its robust assessment.
Anti-money laundering and counter terrorist financing legislation are aimed at protecting against enabling the transfer and disguise of funds from criminal activity, or funding of terrorist groups.
While this is not the only element that the FCA will assess in relation to an applicant, the FCA will only register firms where it is confident that processes are in place to identify and prevent this activity.
Consumer protection
The FCA does not have consumer protection powers for the cryptoasset activities of firms.
“Even if a firm is registered with the FCA, it is not responsible for making sure cryptoasset businesses protect client assets (ie customers’ money), among other things,” the regulator says.
It is unlikely that consumers will have access to the Financial Ombudsman Service or Financial Services Compensation Scheme, irrespective of whether a firm has temporary or full registration.
