UK-based cryptocurrency platforms are struggling to comply with new anti-money laundering obligations. According to reports, as many as 50 cryptocurrency platforms could be shut down after failing to meet new rules introduced by the Financial Conduct Authority (FCA). The regulator explained that an “unprecedented number” of businesses had withdrawn their applications from a temporary permit scheme that allowed them to continue trading while the FCA thoroughly assessed their applications.
Those applications to assess the operations of the cryptocurrency platforms resulted in a “significantly high number” of the businesses receiving warnings they fell short of anti-money laundering standards. Falling short in this area opens the door to organised crime and terrorist groups who could use the platforms to disguise the source of their money.
The FCA has extended its temporary permissions regime to give it more time to assess the applications, which are understood to have been completed to a very poor standard. When a business is forced to withdraw from the temporary registration regime, it must cease trading immediately and return money to customers. If firms continue trading without this temporary permission, they could face legal action and fines from the FCA.
The UK is not alone in cracking down on crypto trading. Chinese payment regulators had already banned banks and other financial institutions from dealing with cryptocurrency transactions due to the significant risks involved. Speculating in cryptocurrency is an incredibly high-risk activity, and you face the prospect of losing all of your money. Despite the FCA regulating platforms from an anti-money laundering perspective, cryptocurrency is not regulated for suitability or other aspects. Therefore investors do not getaccess to the Financial Ombudsman Service or Financial Services Scheme when things go wrong.
Even if a firm is registered with the FCA, it is not responsible for making sure crypto asset businesses protect client assets (i.e. customers’ money), among other things. Many cryptoassets are highly speculative and can therefore lose value quickly. The FCA does not have consumer protection powers for the crypto asset activities of firms