The UK Treasury has released a consultation paper detailing proposed changes to anti-money laundering regulations. The proposed changes suggest bringing all crypto asset service providers under the oversight of the FCA.
The United Kingdom Treasury released a consultation paper suggesting amendments to money laundering regulations. According to the consultation paper, the regulation of crypto assets will be significantly affected.
FCA Would Oversee All Crypto Asset Service Providers
The UK Treasury published a consultation paper with proposed updates to its anti-money laundering regulations. The updates would focus on the crypto sector to reduce regulatory burdens and ensure efficient regulations.
The consultation paper “Improving the Effectiveness of the Money Laundering Regulations” proposes bringing all crypto asset service providers under the purview of the Financial Conduct Authority (FCA), effectively eliminating the need for separate MLRs (Money Laundering Regulations) authorization. The proposed changes came about after reviewing the Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017 (MLRs) undertaken in 2022.
In the consultation paper, Treasury suggests pursuing “smarter regulation.” It details:
"This includes minimising regulatory burden and future proofing regulations, making regulation a last resort and not a first choice, and ensuring a well-functioning landscape of regulators that are responsive and accountable."
Adding;
“Of course, the MLRs can only be effective alongside a robust supervisory regime.”
With its goal of “smarter regulation” in mind, the consultation paper suggested several ways to change the supervision of crypto asset service providers.
Changes to How Crypto Asset Service Providers Are Overseen
The FCA supervises some institutions under regulations passed in 2017 and the Financial Services and Markets Act 2000 (FSMA). Currently, FSMA-regulated institutions are not obligated to have MLRs registration. However, since most crypto firms are not under the FCA’s supervision, they are subject to MLRs. To streamline regulation, the consultation paper suggests that MLRs-regulated institutions would also require FCA regulation but would no longer have to secure MLRs authorization.
The current FSMA regime puts crypto assets under FCA control “if they serve as the underlying asset or property for regulated activities or financial instruments, such as collective investment schemes.” The scope of the FSMA reach will be extended to new activities, including operating a crypto asset exchange and custody, meaning crypto assets that are not subject to FCA oversight will now have to register with the FCA for MLRs supervision. The proposed expansion of the FSMA would essentially include additional crypto-related activities, requiring non-FCA supervised crypto assets to register with the FCA for oversight.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
