Cryptocurrencies provide great prospects for money making. While cryptocurrencies continue to gain popularity among investors worldwide, several nations have prioritized their regulation. In comparison to the industry's early days, most nations have updated their regulations to handle the key concerns associated with cryptocurrency and crypto exchange platforms. In most countries, a separate license is necessary to provide cryptocurrency services such as cryptocurrency exchanges and custodial wallets. This is a complicated approach with many challenges, but a crypto license is necessary for those on the lookout to launch a crypto-based platform.
In the post-Brexit financial landscape, cryptocurrency laws in the UK have been modest, but have evolved. Although the United Kingdom affirmed in 2020 that crypto assets are property, there are no cryptocurrency regulations in place, and cryptocurrencies are not regarded as legal cash. As stated by the Bank of England, since cryptocurrencies lack traditional definitional qualities, they are not regarded as "money" and do not represent a systemic danger to the banking ecosystem's stability. However, given the legal implications, laws, and status of crypto assets and currencies vary depending on their nature, form, and usage, the Financial Conduct Authority (FCA) and the Bank of England have issued a number of cautions and guidelines about the use of cryptocurrencies in the UK.
The regulatory concerns surrounding cryptocurrency encouraged the UK government to form a task force in 2018. Before requiring extra AML/CFT and taxes considerations, the task force specified three different types of cryptocurrencies and three methods in which crypto assets are utilized. In 2021, HMRC (the UK's tax, payments, and customs authority) released a brief on the taxation of cryptocurrencies, claiming that their "distinctive feature" means they cannot be compared to traditional investments or payments and that their "taxability" is dependent on the actions and parties involved. The UK government produced a Crypto Assets Manual in March 2021, which offers guidelines on the tax liabilities related to cryptocurrencies as well as what type of documents cryptocurrency holders may be required to preserve.
The United Kingdom's cryptocurrency legislation is partly linked with that of the European Union, as the country adopted the AML/CFT requirements outlined in the EU's Fifth Anti-Money Laundering Directive (5AMLD) and Sixth Anti-Money Laundering Directive (6AMLD) before leaving the organization. The Money Laundering, Terrorist Financing, and Transfer of Funds (Information on the Payer) Regulations 2017 (the MLRs), which lay out the requirements of private sector enterprises vulnerable to the hazards of money laundering, apply to UK-based crypto asset companies. It contains standards for the implementation of client due diligence processes, which the FCA is authorized to enforce and monitor in order to prevent money laundering and illicit activity funding through cryptocurrency enterprises.
Crypto asset businesses engaging in the following activities must adhere to the MLRs:
This includes crypto asset ATMs, peer-to-peer providers, and issuers of new crypto assets (e.g. Initial Coin Offerings (ICOs), or Initial Exchange Offerings, companies that provide one or more of the following services:
This includes companies that provide services:
Any given crypto asset company needs to follow the below-mentioned measures in order to become compliant with the regulations of the UK. These are:
All cryptocurrency businesses must register with the FCA before beginning their business operations in the UK in order to adhere to AML/CFT requirements. Complete applications are decided upon by the FCA within three months, and if approved, Part 4A Permission to engage in regulated activities is issued. The decision-making procedure may take up to 12 months if an application is incomplete, and it is typically rejected because of omitted or inaccurate information.
Things to keep in mind while submitting an application for registration:
To get registered, you must submit an application through Connect. You will be required to supply current information about your company, management, and shareholders, as well as pay a registration fee to the FCA. When you apply, you will have to explain which crypto activities involving registration under the AML/CTF system you carry out or intend to carry out. Let’s check out the steps involved.
The application fee is not reimbursed if an application is withdrawn during the approval procedure. The applicants typically withdraw when they can't supply all the necessary information or when there are unmet legal deadlines. The FCA will justify its reasoning for rejecting an application and will reimburse the application fee. The application can be submitted again. In parallel to the application fee for authorization, permitted firms must pay a monthly fee, which is computed using a specific formula (including the application fee, company evaluation, and calendar months) and disclosed by the FCA for each individual case. If a crypto firm fails to follow the regulations, the FCA can suspend or terminate its registration at any moment after registration.
To summarize, you will not acquire the FCA crypto registration if:
It is necessary to establish a company in the UK before registering with the FCA. A Private Limited Company (Ltd) is one of the most common company forms in the United Kingdom. The benefits include asset protection, tax planning and reductions, and even a better professional image. A minimum share capital is not required. A criterion for creating a Private Limited Company in the UK is a minimum of one shareholder and a director, who may be the same person and a non-resident of the UK.
A crypto firm must meet the following requirements to be eligible for the FCA's registry:
The Proceeds of Crime Act of 2002 requires that a crypto firm designate a person to be in charge of AML/CFT compliance, to oversee and supervise compliance with policies, procedures, and controls pertaining to money laundering and terrorism financing, and to serve as the nominated officer. The FCA states that this individual must possess the necessary training, expertise, authority, and independence, as well as access to enough resources and information, to be able to perform that duty.
The United Kingdom presents a powerful landscape when it comes to establishing crypto-based platforms. If you are a crypto enthusiast looking for a way to obtain a license in the UK for your crypto asset business, this article must have helped you gain insight into the requirements. Whether you are new to the crypto arena or a pro, one thing is certain. Procuring a crypto license is a complex process with too many hurdles. You will definitely need the assistance of a crypto exchange development company to help you in obtaining a crypto license for your business. You will also need to work with a team of skilled legal advisers to help you make informed decisions and successfully establish a regulated crypto-powered platform in the UK!