The UK Treasury announced through a consultation on money laundering that businesses dealing with non-fungible tokens (NFTs) will be required to register with the Financial Conduct Authority (FCA), even as a new crypto-specific authorization regime is set to be introduced.
It is important to know that the consultation aligns with the government’s efforts to refine cryptocurrency regulations, extending beyond crypto exchanges and custody providers to include NFT issuers under the FCA’s oversight for anti-money laundering (AML) and counter-terrorist financing (CTF) purposes.
NFTs, which are unique digital tokens that typically represent ownership of assets such as art on the blockchain, are expected to remain outside the realm of regulated financial services. However, they will still fall under the regulatory scope for AML and CTF, as per the latest consultation document. This move is a continuation of the UK’s approach to tightening the crypto market’s regulations, previously necessitating registration with the FCA for firms to operate within the country.
Future developments in crypto regulation and industry compliance
The Financial Services and Markets Act passed last year, which marked the beginning of treating crypto activities akin to regulated financial services, does not categorize NFTs as requiring regulation as a financial service unless they are used in regulated activities. This nuanced approach indicates that while direct financial services involving NFTs may not be regulated, the issuers must comply with AML and CTF regulations overseen by the FCA.
The Treasury’s consultation document also hints at the possibility of an expanded regulatory scope as the crypto industry continues to evolve, suggesting that more firms may need to register with the FCA in the future. The government seeks feedback on the proposed regulatory framework by June 9, signaling an open dialogue with industry participants on the future of crypto regulation in the UK.
