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Cryptoasset Business: FCA Registration Requirements & Fees

CP 19/29: Registration  &Fee Requirements for Cryptoasset Businesses Announced

21st October 2019

Last week the FCA published a consultation paper related to Cryptoassets Registration and Fee Requirements.

CP19/29, entitled “Recovery of costs of supervising cryptoassets business under the proposed anti-money laundering regulations: fee proposals” aimed to set out that cryptoassets businesses must:

• Apply to and register with the FCA;
• Be under the supervision of the FCA with respect to anti-money laundering (AML) and Counter Terrorist Financing (CTF) activities;
• Pay an initial registration fee; and
• Pay an ongoing annual fee

This consultation paper (CP19/29) is part of the Fifth Money Laundering Directive (5MLD) that will be implemented by amending the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 – often just referred to as the Money Laundering Regulations or MLR.

Whilst HM Treasury are still deciding which cryptoassets activities will be included within the scope of the MLRs and constitute cryptoassets businesses, the FCA assumes for CP/29 that the definition will apply to:

• Cryptoasset exchange providers;
• Cryptoasset Automated Teller Machine (ATM) Operators;
• Cryptoasset Custodian Wallet Providers;
• Peer-to-Peer (P2P) Cryptoasset Providers;
• Issuers of new Cryptoassers (for example Initial Coin Offering or Initial Exchange Offering); and
• Publishers of certain open-source (OS) software (for example non-custodian wallet providers)

The consultation sets out key dates in relation to the proposed new requirements, the most important of these being 10 January 2020.

• Firms carrying out Cryptoasset Business prior to 10 January 2020 must comply with the new MLRs from 10 January 2020.
• Firms carrying out Cryptoasset Business prior to 10 January 2020 must register with the FCA within 12 months, by 10 January 2021. The FCA have advise that Firms should submit their application before 30 June 2020 in order to ensure they are registered by the deadline.
• All other firms looking to carry out Cryptoasset Business after 10 January 2020 must register with the FCA before undertaking those activities
• All Cryptoasset Businesses, whether registered or unregistered, may be subject to enforcement action from the FCA in relation to any non-compliance with the MLRs from 10 January 2020 onwards.

When a Cryptoasset Business applies to become registered with the FCA they must be able to demonstrate that they:

• Have effective policies, procedures and controls in place to manage AML/CTF risks in a way that is proportionate to their business;
• Can identify, assess, monitor and effectively manage their financial crime risks
• Have taken appropriate steps to identify AML/CTF risks to the business; and
• Carry out regular assessments of its policies and procedures in light of any change in their operating environments.

FCA Fees for Cryptoasset Businesses

The FCA is currently proposing a registration fee of £5000, although this amount is to be consulted upon further.

It should also be noted that a decision on an application will not be made until the registration fee is paid in full.

Alongside the registration fee, the FCA is proposing ongoing annual fees for Cryptoasset Businesses that will be based upon the income arising from the cryptoassets business, currently proposed as a minimum of £1,000, though again this amount is to be consulted upon further.

When does the Consultation Close?

The FCA’s Consultation closes on 11 November 2019 with respect to the registration fee, with feedback expected to be published in December 2019.

In respect of periodic fees, the consultation will close on 10 December 2019, after which the FCA is expected to make comment in relation to these in its Fee-rates paper published in April 2020.  

What should Cryptoasset Businesses do now?

Cryptoasset Businesses will need to ensure they are prepared for when the registration process starts and will also need to prepare suitable AML and CTF policies and procedures before completing and submitting their applications for FCA registration.

These business should also prepare themselves for a greater level of scrutiny going forward, particularly in relation to their AML/CTF processes and policies.

It would be advisable for existing Cryptoasset Businesses to start preparing their applications ready for submission sooner next year rather than later to ensure that the business can continue to function without any delay, since firms will not be able to operate until approval has been granted once the deadline has passed.

If you believe your business will be affected by the new regulations and would like any support or assistance in preparing your AML/CTF policies and procedures or your application for the FCA we would be pleased to support you. Simply drop us a line and we would be happy to discuss how we can help.

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