Cryptocurrencies: Registration

(asked on 21st October 2021) - View Source

Question to the HM Treasury:

To ask Her Majesty's Government what assessment they have made of (1) whether the Financial Conduct Authority’s cryptoasset registration scheme permits UK cryptocurrency firms to move offshore and still serve UK consumers, and (2) the impact of this scheme on the FCA’s objective to secure an appropriate degree of protection for consumers.


Answered by
 Portrait
Lord Agnew of Oulton
This question was answered on 3rd November 2021

The government believes that having an effective anti-money laundering and counter-terrorist financing regime goes hand-in-hand with supporting British fintech firms and consumers by providing confidence that new technologies can be used both reliably and safely. The scope of the UK’s anti-money laundering registration regime for cryptoassets is based on international standards agreed at the Financial Action Task Force (FATF). This applies to cryptoassets regardless of whether they are intended to function as a medium of exchange or as an investment. As the Kalifa review noted, the UK has a hard-won reputation of trust regarding regulation and the rule of law which we must build on. The government supports the FCA’s approach to establishing the regime, which will provide the confidence needed to support genuine innovation in the cryptoassets sector.

Whilst it is open to UK cryptoasset firms to relocate to another jurisdiction, most major financial centres worldwide are in FATF member jurisdictions, which are expected to implement AML standards for cryptoasset firms that are broadly in line with those in the UK. Firms based overseas that do not carry on their cryptoasset business in the UK may still interact with UK consumers. The government launched a consultation on its regulatory approach to cryptoassets and stablecoins on 7 January and will outline next steps in due course. The FCA’s consumer protection objective applies where the FCA is discharging one of its general objectives under the Financial Services and Markets Act 2000, and does not apply with regard to functions conferred under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (the MLRs).

Under the MLRs, firms are expected to assess money laundering and terrorist financing risks when considering the services they provide to current or potential customers. The ultimate decision about whether to provide services to a customer belongs to the bank, which may take into account commercial considerations in addition to financial crime risks.

To comply with the MLRs, cryptoasset firms must demonstrate systems, controls, policies and procedures adequate to deal with the particular risks of the cryptoasset market. That a firm is already permitted to carry out activities in one area therefore does not mean it meets the required standards for another area. It is therefore necessary for a firm to apply to be registered for its cryptoasset activities, even though it has already registered with the FCA for AML supervision related to other activities.

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