Changes in the Financial Monitoring of Crypto Assets in Great Britain: What is in Store for Crypto Businesses

On January 10, 2020, Great Britain enacted a number of important amendments associated with the implementation of the 5th AML Directive of the European Union. Changes apply both to new crypto companies planning start operations in Great Britain and to those already in operation. This article offers an overview of the changes relevant to the crypto business.

Who the new rules apply to?

• Cryptocurrency exchangers;
• Cryptocurrency exchanges;
• ICO (Initial Coin Offering) providers;
• Crypto wallet application providers.

The evident question is whether the new rules apply to those only accepting cryptocurrency payments? The answer is no: the rules do not extend to such companies.

Key crypto business changes

1. FCA (Financial Conduct Authority) is vested with the authority to oversee the compliance of crypto-asset businesses with AML/CFT laws.

2. Companies incorporated after January 10, 2020, must fill out the FCA registration form. Existing crypto companies have to register on or before January 10, 2021, but it is advisable to submit the registration form before June 30, 2020.

3. Crypto companies must be aware of the client funds and perform relevant KYC checks. Besides, company activities and structure should be known. Businesses must monitor suspicious transactions and examine their congruency with the client’s operations.

4. Enhanced customer data storage standards are implemented.

5. Companies must have a financial monitoring department and the AML Officer with due qualifications.

6. When registering with the FCA, companies must pay a registration fee (£5,000), and an annual fee depending on its income (£1,000 minimum).

The FCA controlling the due performance of the new crypto business obligations is granted the following powers:

• demand financial statements and disclosure of necessary information;
• prevent the activities of businesses which are subject to regulation but do not meet the requirements in place;
• demand that companies notify their customers about non-compliance with legislative requirements.

How will this affect crypto companies?

Major challenges are associated with KYC processes and transaction monitoring. Both fiat and cryptocurrency transactions must be monitored, leading to additional expenses related to the purchase of the required software or engagement of relevant partners. For instance, major international projects like Bitfinex, Exmo, Tether, and Binance are already using the services of Chainanalysis, an analytics company helping them monitor blockchain transactions.

The lawyers at SBSB International Law Firm will be happy to help you register your company with the FCA, hire qualified staff, and prepare turnkey solutions. Join our Telegram chat for free online consultations.