FCA Update on Cryptoasset Registrations under the MLRs

On 21 October, Val Smith, Head of Payments and Digital Assets in the FCA’s authorisations division, published a blog post reaffirming the FCA’s commitment to setting high regulatory standards for cryptoasset firms applying for a license under the Money Laundering Regulations (“MLRs”), while also providing a steer to firms on increasing their chances of being successful.

Background

In the past, the FCA has faced scrutiny for allegedly restricting crypto innovation through stringent cryptoasset license registration requirements (with a 14% success rate in applications since Jan 2020, the majority of which were withdrawn following FCA feedback). Smith maintains that these high standards are crucial towards safeguarding consumers, preventing financial crime, and ensuring sustainable industry growth in a growing new market:

“Innovations built quickly on unsafe, unregulated and untrusted foundations become a house built on sand – likely to collapse. Instead, we want to closely collaborate with partners across government, industry and other jurisdictions to develop a crypto sector that’s built on reliable, sturdy foundations.”

The FCA’s aims to keep financial crime out of UK markets and bolster trust in the financial system by holding firms to strong and universal standards. To help meet this high bar, Smith emphasises the importance of early engagement by applicant firms via pre-application meetings to better understand the firm’s expectations and nip any potential issues in the bud.

Registering under the MLRs

Applicant firms should consider doing the following:

• Thoroughly review the FCA's application requirements and FAQ resources (find further information here).

• Take advantage of available guidance, including examples of good and poor practices for applications, to understand expectations clearly.

• Early engagement is highly recommended, starting with a pre-application meeting to address any uncertainties and align on compliance standards.

• Ensure their applications are complete, detailing their controls, procedures, and compliance environment for thorough assessment.

Practicalities to consider:

• The application fee for registration is currently £10,880.

• Timescales from submission: the FCA have 3 months to assess such applications upon receipt, however they can and often do breach this if they deem it necessary.

• Expect 6 months from project initiation, to draft submission/supporting documents, submit the application and deal with FCA.

Having helped several firms prepare cryptoasset registrations under the MLRs recently, ComplyCraft are well placed to support applicant firms and would be happy to chat through if this is something you are thinking of doing. Please reach out and we would be happy to chat through.