Blog

Author

Melissa Cummings – Senior Compliance Associate

Crypto regulation – what has happened?

In recent years, we have seen a dramatic increase in demand for virtual assets/cryptoassets, and as such, an increase in crypto providers aiming to meet the demand. Given the increase in the number of companies worldwide offering crypto or allowing other companies to accept crypto and other virtual assets as a means of payment, there is a very high level of competition. Companies are trying to be more innovative and are also ‘beefing up’ their marketing methods to stand apart from their competitors.

Following the implementation of 5MLD in January 2020, bringing with it the first steps in crypto regulation, there has been a crackdown on cryptoassets. The crackdown is not limited to the UK, but also extends to other countries including, Spain, China, and the U.S. The scrutiny of crypto in the UK can be considered to result from the fact that HMT and the Bank of England have begun exploring the use of a UK Central Bank Digital Currency (CBDC) within the traditional banking structure, which would be used for everyday payment needs alongside cash and bank deposits (however, not prior to 2025). Such scrutiny can also be attributed to the UK government noting an increase in misleading crypto adverts, providing consumers with false/misleading claims on products. The increase in crypto investors who have entered the market has been accompanied by an increase in traders not understanding what crypto is, and its associated risks. Misleading advertisements will therefore pose significant harm to consumers as they will not have the right information to make informed decisions on their investments. To combat this, the UK government aims to bring such adverts under strict financial advertising standards. Implementing new crypto regulation rules will mean that crypto promotions will be subject to FCA rules in line with other financial promotions such as those for stocks, shares, and insurance products. The FCA’s involvement will be to ensure that consumers are protected from false advertisements and that advertisements are fair, clear, and not misleading.

Cryptoasset providers – what do you need to do?

If you are a current cryptoasset provider and have not yet registered with the FCA to continue offering your services, or are a new crypto asset business, you will need to submit an AML registration application to the FCA to receive approval to provide such services. The AML registration application will consist of a suite of documents (relating to AML, Business Plan, Information Technology and information on the firm’s governance arrangements, beneficial owners, and close links) needed for the FCA to properly assess your firm’s (current or proposed) business activity.

Regulated firms will have an advantage over unregulated firms by being able to issue their own promotions. Therefore, you will need to implement policies, procedures, and guidelines to govern your firm’s promotional activities (such as those via your website, e-mail communications and social media). The promotional material should be reviewed frequently to ensure that it complies with the regulations.

In addition to having the relevant documentation, you will also need to make sure that your compliance systems/tools comply with the regulatory requirements as they should ensure that your financial promotions distributed are clear, fair, and not misleading.

How can we help with your crypto regulation requirements?

If you’d like to know more about how we can help with your cryptoasset AML registration, financial promotions or any other crypto regulation requirements, our expert team is here to help.

Contact us today on 0207 436 0630 – or email info@thistleinitiatives.co.uk.