Bank of England and regulators assess crypto regulation in raft of new reports

March 25, 2022 Coin Telegraph

A bundle of interrelated documents remind financial institutions of their responsibilities and look at the state of crypto regulation in the U.K.

The Bank of England Financial Policy Committee and other U.K. regulators are assessing crypto regulation after publishing reports on financial stability relating to cryptoassets and decentralized finance.

The BoE report was released on Thursday, and the Financial Conduct Authority, or FCA, along with the Bank’s Prudential Regulation Authority, or PRA, also released documents simultaneously that all reference one another.

The Bank’s committee, or FPC, stated in its 40-page report that cryptoassets and DeFi pose a “limited” risk to the stability of the UK financial system, but it saw that risk growing “as these assets become more interconnected with the wider financial system.” In response, the FPC promised to assess those risks and make recommendations.

The report found the existing regulatory framework sufficient for mitigating risks where crypto technology served the same purposes as traditional finance. The FPC “welcomed” the Treasury’s proposals for stablecoin regulation, including the proposal to bring the Bank into process, and it expressed support for international efforts to regulate DeFi applications.

The FPC advised financial institutions to “take an especially cautious and prudent approach to any adoption” of cryptoassets or DeFi until the regulatory framework is more robust. It was in that context that PRA Deputy Governor and CEO Sam Woods wrote a “Dear CEO” letter to banks, insurance companies, and designated investment firms on exposure to cryptoassets, explicitly referring back to the FPC report and the FCA notice.

The bulk of the Woods letter is taken up with reminding the addressees of existing policies and regulatory frameworks, in light of their increasing interest. The letter also asks for the completion of a survey on the organizations’ existing crypto exposure and plans for the year, due June 3.

The FCA notice reminded regulated firms of their “existing obligations when they are interacting with or exposed to cryptoassets and related services.” It ran through a list of those obligations, including “being clear with customers” on regulation and risk and prudential and custody considerations.

The FCA gave particular attention to Anti-Money Laundering and registration, pointing out its voluminous list of unregistered cryptoasset businesses. The agency has been investigating a number of those businesses. All unregistered and temporarily registered crypto businesses must complete registration by March 31 or face the possibility of closure in the U.K.

This was not the full extent of crypto-related Bank of England documents released March 24. “Responses to the Bank of England’s Discussion Paper on new forms of digital money” also appeared. It referred back to discussion paper released by the Bank last year on central bank digital currency. The FPC noted that the Bank and Treasury will “launch a consultation” on CBDC this year.

Disgraced MP tells Parliament UK can be the ‘home’ of crypto

January 28, 2022 Coin Telegraph

Coin Telegraph

“These innovations have the potential to disrupt finance, just as social media has disrupted communication, or online shopping has changed retail,” said Matt Hancock.

The former Secretary of State for Health and Social Care and current U.K. Member of Parliament (MP) Matt Hancock urged the House of Commons to make England the “home” of crypto.

Hancock has served as an MP for West Suffolk since 2010 but stood down from his role as the Health Secretary in mid-2021 following controversy surrounding COVID breaches tied to an alleged extramarital affair. Which is to say his endorsement, while welcomed by the industry, may not hold as much cachet as it once did.

Following up from his speech at the House of Commons on Jan. 27, Hancock emphasized the disruptive potential of crypto and fintech on Twitter, noting that:

“The UK can be the home of new innovations like FinTech and Cryptocurrency. Done right we can increase transparency and lead in new world-changing technology.”

During his speech, he pointed to the benefits of crypto and fintech adoption in terms of economic stimulation and even financial crime reduction as he urged the government to “ensure” it develops progressive policy in these areas.

“[Fintech and Crypto] can not only be an economic driver, but also help cut fraud and financial crime because of the transparency that it brings,” he said, adding that “these innovations have the potential to disrupt finance, just as social media has disrupted communication, or online shopping has changed retail.”

The UK can be the home of new innovations like FinTech and Cryptocurrency.

Done right we can increase transparency and lead in new world-changing technology.

My question in the Commons earlier ⬇️ pic.twitter.com/Hsr8QtLxqB
— Matt Hancock (@MattHancock) January 26, 2022

Hancock’s comments come just a couple of weeks after several MPs and members of the House of Lords banded together to launch the Crypto and Digital Assets Group, which aims to ensure forthcoming regulation of the sector supports innovation as opposed to stifling it.

The group is chaired by Scottish National Party MP Lisa Cameron, who noted around the time of the group's launch that, “We are at a crucial time for the sector as global policymakers are also now reviewing their approach to crypto and how it should be regulated.”

“We are at a crucial time for the sector as global policymakers are also now reviewing their approach to crypto and how it should be regulated.”

Earlier this week, former Chancellor of the Exchequer Philip Hammond stated that it was “frankly quite shocking” that the U.K. had fallen behind the European Union in providing clear regulation over the crypto sector.

Hammond warned that if the government fails to catch up in 2022 and end up “manifestly behind the curve” next year, top U.K. based crypto and blockchain tech firms will look to shift headquarters over to countries with friendlier stances on crypto such as Germany and Switzerland, along with Monaco in France.

UK regulator warns against 111 unregistered crypto companies… and FOMO

June 23, 2021 Coin Telegraph

anti-money laundering

The Financial Conduct Authority has warned U.K. consumers of dealing with 111 unregistered crypto firms, calling it “a very real risk.”

The United Kingdom’s financial regulator, the Financial Conduct Authority (FCA) has warned consumers against 111 crypto companies that are yet to register with the FCA.

Since Jan. 10, all U.K.-based crypto firms have had to comply with Anti-Money Laundering and Counter-Terrorist Financing laws, as well as to register with the FCA in order to operate legally. Many are yet to do so.

Mark Steward, FCA’s head of enforcement asserted at the “City & Financial’s City Week” event on June 22, that the unregulated crypto entities pose a threat to consumers, banks, and payments firms who do business with them, noting that:

“We have a number of firms that are clearly doing business in the UK without being registered with us and they are dealing with someone: banks, payment services firm, consumers. This is a very real risk so we are worried about that.”

The FCA has compiled a list of more than 100 crypto firms that appear to be operating unregistered, so that investors can double check if a firm the intend to deal with is non-compliant.

The financial watchdog appears to be extra vigilant in light of the burgeoning popularity of cryptocurrency in the UK. According to the FCA’s own recent survey 2.3 million UK adults now hold crypto. However, there has been a notable downward trend in investors' overall understanding of the crypto assets they own.

Steward likened the growth of crypto industry to the Dutch tulip mania of the 1630s, noting that fear of missing out (FOMO) is driving many to speculate on highly volatile assets:

“The reason many are investing now is because they have a fear of missing out on what might be a boom. Leaving aside how volatile these instruments actually are, it has tulip mania written all over it.”

The operational hurdles from the U.K.’s stringent anti-money laundering laws may be putting off a lot of these unregistered firms, with Cointelegraph reporting on June 4 that so far 51 crypto firms have withdrawn their registration applications to the FCA.

The U.K. government is actively trying to curb criminal behavior the utilizes crypto such as money laundering and terrorism financing.

According to The Times UK, earlier this month the London Metro Police called for legislative changes that would enable authorities to approach crypto in a similar fashion to cash-based crime.

The Metro Police are reportedly calling for the legislature to allow the freezing of crypto assets from businesses and individuals under police investigation, while also requesting stringent regulations which would make it harder for criminals to make crypto transfers.

FCA cautious

The FCA has taken a highly cautious approach to crypto, with the government watchdog imposed a ban on crypto-derivatives platforms in January, while warning investors of the risks associated with crypto in that same month.

The FCA was appointed the supervisor of Anti-Money Laundering and Counter-Terrorist Financing measures on Jan. 10, 2021, and from that date, all U.K.-based crypto-asset firms have had to comply with AML regulations and register with FCA.

Firms operating before Jan. 10 of this year, had to apply for a Temporary Registration Regime (TRR) which allowed firms to continue trading while the FCA processed their full registrations were being assessed.

A lack of onsite processing due to the global pandemic resulted in a backlog of applications that are still being processed, and the FCA announced on June 3 that the final date for temporary registrations has been extended from July 2021 to March 2022.

U.K. crypto regulation