The Financial Conduct Authority (FCA), the chief regulatory body of the UK has just announced a “Temporary Registration Regime” for existing crypto businesses in the country. The temporary regulatory solution would allow any crypto business that applied for the business license before 16 December 2020 to continue its operation until 9 July 2021.
FCA also warned customers to withdraw their funds from those crypto businesses who were required to register with the regulatory body by today but failed to do so, before 10th January 2021. The latest set of regulatory guidelines issued by the regulatory body asks consumers to
- Check if the firm they use is on the FCA’s Register or list of firms with Temporary Registration.
- If they are not, check whether they are entitled to carry on business without being registered with the FCA (this may apply if they are registered in a different country).
- If the firm is not entitled to carry on business, then consumers should withdraw their crypto-assets and/or money before 10 January 2021. This is because the firm will be operating illegally if it does not cease trading from 10 January 2021.
FCA started to supervise the anti-money laundering and counter-terrorist financing regulations from 10 January 2020. Any crypto-asset business operating in the UK before 10 January 2020 was required to comply with the Money Laundering Regulations and register with the FCA before 10 January 2021. However, any crypto firm starting after FCA began supervising the regulatory policies are required to obtain a full registration before operating.
Which Crypto Businesses Come Under New Temporary Regulatory Solution?
The new set of guidelines issued by the FCA would impact only those crypto businesses who have already applied for registration by 16 December 2020 and those applications which are under assessment of the regulatory body. The temporary Registration Regime would allow all these crypto businesses to operate in the UK from 9 January 2020 until 9 July 2021. Any firm which has not applied for the registration until 15 December won’t qualify for the existing temporary relief.
The FCA announcement noted,
Firms that did not submit an application by 15 December 2020 will not be eligible for the temporary registration regime. They will need to return cryptoassets to customers and stop trading by 10 January 2021. Firms that do not stop trading by that date are at risk of being subject to the FCA’s criminal and civil enforcement powers.
The FCA register currently has 90 applications on its list for approval coming down from 150 at the start of the month. Some of the key crypto businesses which are still in the regulatory pipeline include Bitstamp, B2C2, and Galaxy Digital.
What Led to The Temporary Regulation Regime
FCA revealed that processing registration application is a complex task and thus it is taking longer than they anticipated leading to the issuance of a temporary regulatory solution. The regulatory body has only approved 3 applications until now which include crypto exchange Gemini with two registrations along with another crypto exchange Archax and crypto payments app Ziglu.
The regulatory watchdog also notified that they do not possess any consumer protection power related to the activities of the firm in the absence of a complete regulatory framework. Thus consumers must take precautions before investing in crypto because even if a firm is registered with the FCA, they don’t have the power to protect consumers from the wrongdoings of the business.
Many crypto assets are highly speculative and can therefore lose value quickly. The FCA does not have consumer protection powers for the crypto asset activities of firms. Even if a firm is registered with the FCA, we are not responsible for ensuring crypto asset businesses protect client assets (ie customers’ money), among other things.