FCA extends temporary regime for crypto firms amid AML issues
Many cryptoassets are highly speculative, but the FCA does not have consumer protection powers for the cryptoasset activities of firms, even if a firm is registered with the FCA.
The Financial Conduct Authority (FCA) has extended the Temporary Registrations Regime (TRR) for existing cryptoasset businesses from 9 July 2021 to 31 March 2022.
This allows existing cryptoasset firms, which applied for registration before 16 December 2020, and whose applications are still being assessed, to continue trading.
The extension addresses the fact that a significantly high number of businesses are not meeting the required standards under the Money Laundering Regulations resulting in an unprecedented number of businesses withdrawing their applications.
The extended date allows cryptoasset firms to continue to carry on business whilst the FCA continues with the robust assessment being undertaken.
“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”, said the official statement.
Many cryptoassets are highly speculative, but 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 unlikely that consumers will have access to The Financial Ombudsman or Financial Services Compensation Scheme, irrespective of whether a firm has temporary or full registration.
Commenting on the news, Adam Holden, CEO of compliance solutions specialist NorthRow, stated: “The extension of the Temporary Registrations Regime (TRR) for cryptoasset businesses reflects a dire lack of progress made by much of the crypto industry when it comes to regulatory compliance. While it’s disappointing that the FCA has been forced to take this step, it gives crypto businesses another chance to put in place the robust processes and systems needed to satisfy regulators and build trust in their business and the wider crypto industry.
“Systems that quickly and easily verify customer details at the onboarding phase, and help continuously monitor for risky behaviour that may warrant further investigation over the full lifecycle of that relationship, isn’t as costly or complex as many believe – and can be put in place with minimal friction for customers. At NorthRow we’re working with businesses in this space to help make meeting regulatory requirements as easy as possible for all involved, including those among the first firms registered with the FCA under the current rules.
“Crypto businesses now have until March 2022 to take the appropriate action and ensure they’re not exposed to costly enforcement action which will further erode public trust in cryptoassets. Until the crypto industry takes its regulatory responsibilities seriously, it will continue to attract criticism and be unable to reach its full potential. With eight months to achieve compliance, they need to be taking action today.”
NorthRow provides technology to streamline due diligence and customer onboarding processes. Digital asset exchange Archax is among its customers. The firm has recently partnered with Muinmos to offer a completely automated onboarding solution.
