From 10 January 2020 the FCA will be the anti-money laundering and counter-terrorist financing supervisor for cryptoasset businesses (though it will not be regulating how cryptoasset businesses conduct their business with consumers) so it has published a consultation on its proposed registration arrangements and fees structure.
Some businesses that carry on cryptoasset related activity will be authorised by the FCA under the Financial Services and Markets Act (FSMA) or other regulations for non-cryptoasset related regulated activity that they undertake (for example, arranging deals in investments). Any cryptoasset related activity carried on by these businesses will not be covered by FSMA or other regulations such as the Electronic Money Regulations (unless they are using security tokens or e-money tokens).
Consequently, consumers will not have the same protections in relation to cryptoasset activity (for example, exchanging cryptoassets for government or central bank issued money, such as GBP or euros). The FCA expects cryptoasset businesses to ensure that they do not mislead their consumers as to what consumer protections apply and the status of their FCA registration.
The consultation paper sets out the FCA’s proposals for recovering the costs of this new role as it is funded entirely by fees and levies from the firms it regulates.
Cryptoasset businesses undertaking any of the activities listed below should assume that they will be supervised by the FCA and that the fees proposals will apply to them.
Cryptoasset activity (as described in 2019 Treasury consultation on 5th money laundering directive)
- Cryptoasset exchange provider: A business that provides the following services: exchanging fiat currency (government-issued currency) for a cryptoasset (or vice versa); or exchanging one cryptoasset for another cryptoasset.
- Cryptoasset Automated Teller Machine (ATM): Physical kiosks that allow users to exchange cryptoassets and fiat currencies
- Custodian Wallet Providers: A business that looks after the customer’s tokens in its IT system or server and, may administer or transfer the token on behalf of the customer.
- Peer to Peer Providers: A business that provides an online marketplace which facilitates the exchange of fiat currencies and cryptoassets (both fiat-to-crypto and crypto-to-crypto) between prospective buyers and sellers
- Issuers of new cryptoassets, e.g. Initial Coin Offering (ICO) or Initial Exchange Offering (IEO): A business that sells a cryptoasset, promoted or sold as a new type of cryptoasset or one that will become usable in the future, in exchange for fiat currency.
- Publication of open-source software e.g. Non-Custodian Wallet providers: A business that provides software such as an application, that may be downloaded and used by a customer on their device to store or administer a token, such as a non-custodian wallet application that a customer can download onto a device to store the private key in relation to a token.
Chapter 3 of the consultation presents the FCA’s fees proposals for consultation:
- a registration fee of £5,000
- annual periodic fees based on income
The consultation has two end dates: 11 November 2019 for the registration fee and 10 December 2019 on periodic fees.
