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UK to regulate crypto like financial products by 2027
The UK Treasury is preparing new rules to regulate the cryptocurrency market, with legislation set to take effect in 2027.
Cryptocurrency firms offering services in the UK will be required to meet standards set by the Financial Conduct Authority, aligning them with regulations for other financial products.
The move aims to increase transparency and consumer protection, following a sharp rise in investment scams, many involving fake cryptocurrencies.
Cryptocurrency companies must already register with the FCA if their activities fall under anti-money laundering laws, but the new rules would extend oversight and impose additional requirements.
Ministers are also considering a ban on political donations made with cryptocurrency, citing concerns about donor identity and transparency.
This follows recent high-profile cases, including the conviction of Zhimin Qian for a multibillion-pound bitcoin fraud, and a record £9 million donation in cryptocurrency to Reform UK by businessman Christopher Harborne.
🔗 Source: The Guardian
🧠 Food for thought
Implications, context, and why it matters.
Financial Conduct Authority (FCA) authorisation moving beyond anti-money laundering (AML) registration
- Rules require FCA authorisation for specified cryptoasset activities, which goes beyond AML registration under the UK Money Laundering Regulations (MLRs) 1. Firms on the FCA cryptoasset register providing custody, operating trading platforms, or deal/arrange in qualifying cryptoassets (those in scope such as certain cryptocurrencies and tokens set by the regulator) must secure authorisation 1.
- A transitional regime allows early applications 1. Firms that do not secure permission must stop new business and wind down within up to two years that the FCA can shorten 1. Operating platforms or dealing as principal or agent or arranging with UK consumers require UK authorisation, subject to a limited intermediary carve out 1. Safeguarding or staking need UK authorisation if done in the UK or for a UK consumer, and issuing a qualifying stablecoin needs authorisation only from a UK establishment 1.
- Regulatory technology (RegTech), Know Your Customer/Know Your Business (KYC/KYB) and on chain analytics providers (tools that analyse blockchain transaction data) can prospect from the FCA cryptoasset register 2. Many of these firms face a compliance gap as they move from AML registration to FCA authorisation 1.
- Consultancies can support issuers that may need UK subsidiarisation 3. That includes issuers of systemic stablecoins (stablecoins pegged to the British pound that regulators deem systemically important) under Bank of England (the UK’s central bank) proposals that require a UK subsidiary with backing assets and capital in the UK 3.
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