A substantial amount of cryptocurrency businesses are not meeting the minimum anti-money laundering and counter-terrorism requirements set by the UK’s Financial Conduct Authority (FCA).
As of January 2021, cryptocurrency-related companies have had to register with the authority before doing business.
The FCA said it “will only register firms where it is confident that processes are in place to identify and prevent this activity”.
Just five companies are registered, while a further 90 have temporary registration, meaning they can do business while their applications are evaluated. This status does not deem them “fit and proper”, though, according to the FCA, which has decided to extend the end date of its temporary registrations regime from July 9 to the end of March 2022, it said.
The extended end date will allow cryptoasset firms to continue trading while the FCA continues with its assessments.
An FCA statement read: “A significantly high number of businesses are not meeting the required standards under the Money Laundering Regulations. This has resulted in an unprecedented number of businesses withdrawing their applications.
“The extended date allows cryptoasset firms to continue to carry on business while the FCA continues with its robust assessment.
“Anti-money laundering and counter terrorist financing legislation are aimed at protecting against enabling the transfer and disguise of funds from criminal activity, or funding of terrorist groups.”
While this is not the only element that the FCA will assess in relation to an applicant, the FCA will only register firms where it is confident that processes are in place to identify and prevent this activity.
Many cryptoassets are highly speculative and can therefore lose value quickly. The FCA does not have consumer protection powers for the cryptoasset activities of firms.
The statement continued: “Even if a firm is registered with the FCA, it is not responsible for making sure cryptoasset businesses protect client assets (ie customers’ money), among other things.
“Cryptoassets are considered very high risk, speculative investments. If consumers invest in cryptoassets, they should be prepared to lose all their money.
“It is unlikely that consumers will have access to the Financial Ombudsman Service or Financial Services Compensation Scheme, irrespective of whether a firm has temporary or full registration.”