FCA to Supervise Cryptoasset Business Under AML Regulations

by , on Oct 30, 2019 12:00:47 PM


The financial regulator in the United Kingdom, the Financial Conduct Authority (‘FCA’), has issued a consultation paper on the ‘Recovery of costs of supervising cryptoasset business under the proposed anti-money laundering regulations: fee proposals’ (CP19/29). 

CP19/29 is part of the transposition of the EU 5th Anti Money Laundering Directive (5MLD), which sets out requirements for cryptoasset businesses which will be implemented through amendments to the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs).

The FCA will supervise cryptoasset businesses for the purposes of anti-money laundering and counter-terrorist financing (AML/CFT) as of 10th January 2020. Thus, all UK cryptoasset business will need to register with the FCA which will be responsible for AML/CTF registration and supervision. 

Regulated Activities

Although the Treasury has not yet confirmed which activities will be covered;  cryptoasset businesses providing any of the activities listed hereunder will presumably  be supervised by the FCA and subject to pay the stipulated fees:

  • Cryptoasset exchange providers;
  • Cryptoasset Automated Teller Machines (ATM);
  • Custodian Wallet Providers;
  • Peer to Peer Providers;
  •  Issuers of new cryptoassets, e.g. Initial Coin Offering (ICO) or Initial Exchange Offering (IEO); and
  • Publication of open-source software e.g. Non-Custodian Wallet providers.

Registration Process

UK cryptoasset businesses are required to register with the FCA as of 10th January 2020. This obligation effectively means that:

  • Businesses already authorised by the FCA to provide other activities must register if they intend on undertaking cryptoasset activities;
  •  New cryptoasset businesses that will be operating after the 10th January 2020 must be registered before carrying out any operations;
  • Existing cryptoasset businesses which are already in operation prior to the 10th January 2020 may continue operating. However, they must comply with the MLRs and must be registered by the 10th January 2021, or stop providing cryptoasset activities. Furthermore, existing businesses whose registration is refused must also cease operations.

As of the 10th January 2020, all cryptoasset businesses will be supervised and subject to enforcement sanctions by the FCA, even if they fail to register.

In order to register, a business must complete an online application form, provide all requested information and pay the registration fee. FCA’s assessment will consider whether businesses can demonstrate the following:

  • That policies, controls and procedures are in place to manage AML/CTF risks;
  • That it is able to effectively identify, monitor and control financial crime risks;
  • Undertaking regular assessments of its policies and procedures to ensure they are up to date.

Proposed Fees for Registration

The proposed registration fee is £5,000, however, this sum is subject to further consultation. The FCA will also set ongoing fees based on the income received by the cryptoasset business, with the proposed minimum fee set at £1,000, subject to further consultation.

Consultation Period

The FCA is accepting responses to its consultation paper regarding any comments on the proposed registration fee of £5,000 and the proposals on periodic fees including the minimum fee threshold. Following this consultation period, the FCA will set the registration fee which will be published in a Handbook Notice in December. Feedback will then be provided on the periodic fees in April 2020, with a policy statement being finalised in June 2020.