UK Treasury Proposes Changes to Crypto Regulations for Smarter Oversight
Summary:
The UK treasury has proposed changes to money laundering regulations that would impact the oversight of crypto assets. These changes resulted from a 2022 review of the 2017 Money Laundering, Terrorist Financing and Transfer of Funds Regulations (MLRs), aiming for "smarter regulation". The paper suggests that institutions regulated by MLRs should also fall under the Financial Conduct Authority (FCA) regulation and not need MLRs authorization separately. It also proposes extending the reach of the Financial Services and Markets Act 2000 (FSMA) to include new activities like operating a crypto-asset exchange and custody.
The British government's treasury department has put out a discussion document concerning modifications to anti-money laundering rules that would influence the governance of digital currencies in multiple ways. The suggested alterations derive from an examination of the 2017's Anti-Money Laundering, Terrorism Financing, and Funds Transfer (Payer's Information) Regulations (MLRs), carried out in 2022. The suggested changes now aim towards "intelligent regulation" aspect, which includes lowering regulatory strain, future-proofing the laws, considering regulation as the last alternative rather than the first, ensuring regulators' environment functions properly and they are responsive, and answerable.
The document amplifies that an effective MLRs would require a solid supervisory system. In this regard, it lists a few ways the supervision for service providers of digital assets may be recalibrated.
As per the rules approved in 2017, the Financial Conduct Authority (FCA) oversees certain entities under its purview, in conjunction with the Financial Services and Markets Act 2000 (FSMA). Those institutions regulated by FSMA are not required to register via MLRs. However, most crypto companies are not under FCA supervision and thus are subjected to MLRs. The discussion document suggests those institutions regulated by MLRs should also be regulated by the FCA, and they shouldn't need to seek MLRs authorization.
Presently, under FSMA, crypto assets are under FCA’s purview if they function as the base asset or property for regulated activities or financial tools, like collective investment plans. The scope of FSMA will be broadened to include new activities like running a crypto asset exchange and custody. Cryptocurrencies, not under FCA's authority, now need to register with FCA for MLRs supervision.
The paper points out that the evaluations carried out under MLRs and FSMA have variations. "Notably, the type of individuals that can have control and the limits for such control differ between the systems," the document mentions. The discussion paper also brings up the issue of whether to keep two distinct control standards or not, and recommends adapting the MLRs requirements to be more in line with those of FSMA.
Published At
3/13/2024 12:53:54 AM
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