Crypto Asset Firm

Crypto Asset Firms in the UK are regulated by the Financial Conduct Authority (FCA) and are authorised to provide a range of services, including crypto-to-fiat and crypto-to-crypto exchanges, wallet management, and other cryptocurrency-related offerings. By obtaining this licence, businesses can establish themselves as trusted players in the fast-evolving digital finance space, offering secure and compliant solutions to clients navigating the market.

Overview

Services Provided

Crypto-to-fiat
Crypto-to-crypto exchanges
Wallet services
Crypto ATMs

Capital Requirements

No specific capital requirement, but must demonstrate financial soundness, operational resilience and AML measures.

Transaction Limitations

No specific transaction limits, but AML/CTF controls are critical.

Safeguarding Requirements

Must safeguard client crypto assets and segregate them from the firm's holdings.

Jurisdictional Limitations

Restricted to operations within the UK, unless international requirements are met.

Legal & Regulatory Framework

Governed by 5MLD
Money Laundering Regulations 2019 (MLRs)
FSMA.

Key Restrictions

AML/CTF Compliance: Firms must meet strict AML/CTF requirements.
No Payment Services: Firms are prohibited from offering Payment Initiation Services (PIS) or Account Information Services (AIS).

Regulatory authorisation process

The Financial Conduct Authority (FCA) usually assesses a complete application within 3 months.

The Financial Conduct Authority (FCA) requires an application fee of £10,880.

Exemptions & exclusions

Excluded activities

Regarding marketing, cryptoasset businesses registered with the FCA under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs) can communicate their own financial promotions or have them communicated on their behalf.

Communications that relate to qualifying cryptoassets and are made by or on behalf of a registered person are exempt. Non-real time communications prepared by the registered person are also exempt.

Regulatory Updates

Deep dive into Crypto Asset Firm

Introduction

Position your business as a leader in the digital finance space by becoming a Crypto Asset Firm in the UK, monitored by the Financial Conduct Authority (FCA). This licence allows firms to offer services such as crypto-to-fiat exchanges and wallet management while ensuring compliance with the necessary regulations. Crypto Asset Firms are essential for businesses that want to operate securely in the fast-growing cryptocurrency market.

Definition

A Crypto Asset Firm offers services such as crypto-to-fiat and crypto-to-crypto exchanges, wallets, and other cryptocurrency-related services, subject to Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF) regulations.

Additional Information (Services)

Crypto-to-fiat and Fiat-to-Crypto Exchanges: Facilitating the exchange of cryptocurrencies for traditional fiat money and vice versa.
Crypto-to-Crypto Exchanges: Allowing customers to trade one type of cryptocurrency for another.
Custodian Wallet Services: Securely storing and managing private keys for clients to access and transfer their cryptocurrencies.
Crypto ATMs: Operating machines that enable users to exchange cryptocurrencies for cash or vice versa.

Additional Information (Legal & Regulatory Framework)

The 5th Anti-Money Laundering Directive (5MLD): The 5MLD, implemented by the EU in 2020, expanded the regulatory framework for combating money laundering and terrorist financing. Under 5MLD, crypto asset firms, including crypto exchanges and custodian wallet providers, were explicitly brought under the scope of anti-money laundering (AML) regulations. This means that crypto businesses are required to apply the same due diligence, transaction monitoring, and reporting obligations that traditional financial institutions follow, ensuring greater transparency and reducing the anonymity of crypto transactions.
The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs): Crypto asset firms are subject to the Money Laundering Regulations 2017, which set out requirements for implementing anti-money laundering (AML) and counter-terrorism financing (CTF) measures. These regulations require firms to conduct customer due diligence, monitor transactions, and report suspicious activity to prevent money laundering and terrorist financing.
The Money Laundering and Terrorist Financing (Amendment) Regulations 2019: In December 2019, the UK enacted amendments to the 2017 regulations, expanding their scope to include crypto asset businesses. As a result, crypto exchanges and custodian wallet providers became subject to AML and CTF regulations. This amendment requires these businesses to register with the Financial Conduct Authority (FCA) and comply with the same stringent standards applied to traditional financial institutions.
Financial Services and Markets Act 2000 (FSMA): Crypto asset firms operating in the UK must comply with FSMA, which governs financial services providers and ensures consumer protection and market integrity. This act provides the legal framework under which the FCA supervises crypto firms, ensuring they meet compliance and operational standards.

Additional Information (Key Restrictions)

AML/CTF Compliance: Crypto asset firms must comply with anti-money laundering (AML) and counter-terrorism financing (CTF) regulations, including customer due diligence and transaction monitoring.
Restrictions on Crypto Derivatives: The FCA has banned the sale of crypto derivatives and exchange-traded notes to retail consumers, limiting the services crypto asset firms can offer in this space.
No Traditional Banking Services: Crypto asset firms cannot offer services such as loans or savings accounts and are limited to crypto-related services.
Promotional Rules: Strict rules govern the promotion of crypto assets, including the requirement for clear risk warnings and cooling-off periods for consumers.