UK Govt unveils plans to establish FCA as supervisor of future cryptoassets AML/CTF regime

Maria Nikolova

The Government plans to bring all relevant cryptoasset businesses into AML/CTF regulation in January 2020.

A new Economic Crime Plan, agreed between the Chancellor Philip Hammond, Home Secretary Sajid Javid, and heads of law enforcement, major financial institutions and legal, accountancy and property organisations, was published on Friday, July 12, 2019.

The plan outlines actions to better tackle the scourge of ‘dirty money’ in the UK. It brings together the public and private sectors in closer cooperation, with improved levels of information sharing, resource pooling and technological innovation.

The plan draws together actions to overhaul the approach to tackling economic crime, including establishing a new cryptoassets regime with the Financial Conduct Authority (FCA), going beyond international standards to create a comprehensive response to the use of cryptoassets in illicit activity.

The Government aims to establish the FCA as the supervisor of the future cryptoassets AML/CTF regime.

The Government is developing a robust regulatory response to address the risks posed by the use of cryptoassets for illicit activity, as identified by the FATF and the Cryptoasset Taskforce. The government therefore plans to go beyond the requirements set out in 5MLD, bringing all relevant cryptoasset businesses into AML/CTF regulation in January 2020.

This will aim to not only meet the latest international standards but provide a comprehensive response to the use of cryptoassets for illicit activity. The FCA will be the AML/CTF supervisor of cryptoasset firms, drawing on its considerable experience in this area. In recognising the risks that these types of activities pose, the government is considering expanding the FCA’s supervisory toolkit to ensure it has the appropriate means by which to introduce and maintain a strong AML regime in the UK for relevant cryptoassets firms.

Let’s recall that, earlier in July, the FCA unveiled its proposals for rules to address harm to retail consumers from the sale of derivatives and exchange traded notes (ETNs) referencing certain types of cryptoassets. The FCA is consulting on banning the sale, marketing and distribution to all retail consumers of all derivatives (ie contract for difference – CFDs, options and futures) and ETNs that reference unregulated transferable cryptoassets by firms acting in, or from, the UK. This consultation fulfils the FCA’s commitment in the UK Cryptoasset Taskforce Final Report to explore a potential ban.

The FCA estimates the potential benefit to retail consumers from banning these products to be in a range from £75 million to £234.3 million a year.

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