UK FCA Warns Crypto Firms to Act Now to Avoid Closure Due to Non-Registration

The UK Financial Conduct Authority (FCA) has warned today that companies operating in the cryptocurrency sector have until the end of June to register with the watchdog.

Since 10 January the FCA has been in charge of overseeing the anti-money laundering, anti-terrorist financing and know your customer compliance for crypto companies.

Although companies do not have to be registered until 10 January 2021, the regulator said in a press release released today that “the 30 June date allows the FCA to review submitted applications and raise any follow-up questions with firms, with enough time for that process to be completed before 10 January 2021.”

Firms that are already registered with the FCA can ignore the warning notice, but those who are currently registered under the Financial Services and Markets Act 2000, Electronic Money Regulations 2011 or Payment Services Regulations 2017 and are “undertaking crypto asset activity subject to the MLRs [money laundering regulations]”, must apply for registration.

How to Register Crypto Businesses with the FCA

Companies booking cryptoasset income up to £250,000 must pay a registration fee of £2,000. Larger companies with cryptoasset income greater than £250,000 must pay a fee of £10,000. For more on the registration process, see the FCA page here.

Crypto exchanges and asset managers with offices – in particular head offices – in the UK, may find that the FCA takes that “to indicate that the activity is being carried in the UK”, and as such would require the company to be registered.

However, having clients in the UK is not in and of itself sufficient to warrant registration, according to FCA documentation: “For example, if a cryptoasset exchange, registered in a jurisdiction other than the UK, and which has no offices or agents in the UK but nevertheless permits UK customers to open trading accounts and permits them to buy/sell/hold cryptoassets; we would not automatically consider that as business being carried on in the UK.”

Which Crypto Firms Must Register with the FCA?

The scope of cryptoasset activities that might come under the purview of the FCA conducted by sole practitioners or firms can be found here.

The following cryptoasset activities carried out by businesses would require their registration, although this list provided by the FCA is not exhaustive:

• Cryptoasset exchange provider, including Cryptoasset Automated Teller Machine (ATM)
• Peer to Peer Providers
• Issuing new cryptoassets, e.g Initial Coin Offering (ICO) or Initial Exchange Offerings
• Custodian wallet providers.

The FCA has provided a flow chart for firms to determine if they may be required to register. The flow chart can be viewed here.