FCA Registration for Crypto Asset Firms

Which cryptoasset firms require registration?

 

An overview.

Whilst some (or most) cryptoassets are not regulated by The FCA (see our article here), depending on the services offered cryptoasset firms, it may be required to register with the FCA for money laundering purposes.

Since 10 January 2020, the FCA have been the anti-money laundering and counter-terrorist financing (AML/CTF) supervisor of UK cryptoasset businesses (under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017).

So which firms require to be registered? 

FCA registration of cryptoasset firms (AML/CTF).

Since 9 January 2020, all new firms subject to FCA registration must be registered successfully before starting to trade.

Be it as the cryptoasset industry is one of the fastest evolving area, it can be difficult for firms to assess and identify their obligation to register. The FCA have provided a relatively simplified flow-chart to assist firms with their own assessment.

Having assisted a number of firms with their own reviews, we wanted to create this article to warn firms about hidden complexities when it comes to cryptoassets.

cryptoasset-registration-flowchart_edite

What services require FCA registration?

As indicated by the flow chart above, Crypto Businesses offering the following services are subject to the FCA's AML registration requirements:

  • Exchange of fiat currency for Cryptoassets

  • Providing custodian wallets for storing cryptoassets on behalf of customers

  • Exchange of one cryptoasset for another

  • Operating Cryptoasset ATMs (or similar machinery)

  • Facilitating peer-to-peer exchange of cryptoassets

  • Participation in 'Initial Coin Offerings' (ICO)

It is important to note that whilst the services described above are based on a vague definition of cryptoasset captured virtually all forms of cryptoassets, including stablecoins

“cryptoasset” means a cryptographically secured digital representation of value or contractual rights that uses a form of distributed ledger technology and can be transferred, stored or traded electronically;"

and

“cryptoasset” includes a right to, or interest in, the cryptoasset."

 

The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017

What if you do not operate in the UK...

The registration requirements have a territorial limit, meaning that firms without any presence in the UK will not be subject to registration requirements. Crypto firms should apply caution however. In today's environment, careful consideration should be given to working with a decentralised work-force, whereby the employees, suppliers or contractors would be based outside of the UK, however the business operation (and its assets) are within the UK. In such cases, it is likely that the Crypto Business will be subject to registration requirements, provided that other aspects are met too.