Casey Wagner

Just days after highlighting how difficult it is for crypto companies to get the green light to operate in the United Kingdom, the country proposes new, stricter guidelines for approval.&nbsp;



In an 82-page <a href="https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1133404/TR_Privacy_edits_Future_financial_services_regulatory_regime_for_cryptoassets_vP.pdf" target="_blank" rel="noreferrer noopener">proposal</a> published Wednesday, the UK Treasury highlights a need for increased communication between regulators and crypto firms in order for the country to establish itself as a “competitive location for sustainable finance.”&nbsp;



The document covers a wide range of topics, including NTFs, <a href="https://blockworks.co/news/nuclear-bitcoin-mining-hits-snag">bitcoin mining</a> and stablecoins.&nbsp;



“Former chancellor Philip Hammond has declared that the UK needs to take measured risk in order for the UK to excel as a leader in cryptocurrencies, but for that the community needs measurements to abide by,” Katharine Wooller, business unit director at digital asset protection firm Coincover, told Blockworks.&nbsp;



“If we want to get ahead as a global leader in digital assets, we need to stop assessing firms, and start working with them to develop a regulatory framework.”



Crypto exchange Binance head Changpeng “CZ” Zhao tweeted he was “happy” to see progress being made toward “progressive” regulation.



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<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Happy to see the UK, a global leader in fintech, work on progressive crypto regulation. We hope their plans reflect <a href="https://twitter.com/FinStbBoard?ref_src=twsrc%5Etfw">@FinStbBoard</a> recommendations: the regulation should be coordinated, consistent, comprehensive and proportionate to the nature, scale and complexity of risks. <a href="https://t.co/3w4pHJQZIN">https://t.co/3w4pHJQZIN</a>&mdash; CZ 🔶 Binance (@cz_binance) <a href="https://twitter.com/cz_binance/status/1620754665918050315?ref_src=twsrc%5Etfw">February 1, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
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The proposal comes as more crypto companies urge for clear and achievable guidelines around digital assets.



The UK’s Financial Conduct Authority (FCA) said last week only <a href="https://blockworks.co/news/uk-tougher-on-crypto-companies">around 15% of applicants are successful</a> in securing a spot on the agency’s cryptoasset firm registry, a must for any business hoping to conduct operations in the country.&nbsp;



The Treasury is seeking to take the registration process a step further, requiring crypto firms — even those already registered with the FCA — to apply for authorization under the new “Financial Services and Markets Act (FSMA)-based regime.”&nbsp;



The new FSMA rules would be stricter on anti-financial crime and anti-money laundering regulations, the proposal added.&nbsp;



<h3>UK regulators may still fear crypto</h3>



The suggestion is unlikely to go over well with companies who already went through the rigorous process of registering with the FCA. Only 41 firms have successfully done so to date.&nbsp;



The FCA cited concerns with personnel leading various companies as reasons for denying many applications.&nbsp;



“It is difficult to judge whether leading personnel in firms ‘lack appropriate knowledge, skills and experience’ when it is judged against a lack of transparency and an absence of benchmarks and guidance from the FCA,” Alexander Carter-Silk, cryptocurrency solicitor at Keystone Law, told Blockworks.&nbsp;



“There is no clear explanation as to what is applicable to crypto asset businesses, possibly because the FCA is fearful of the new technology.”&nbsp;



The period for public comment on the proposal will end on April 20, 2023, the government said.



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UK Crypto Proposal Would Tighten Screws on Crypto Even Harder

Ben Strack

<div id="highlights-block_622108a13a7ee" class="highlights">
 <ul>
 <li>The Financial Conduct Authority added 172 firms to its list of unregistered crypto businesses during the six-month period</li>
 <li>More people checked the safety of cryptocurrency using the FCA’s ScamSmart Warning List tool than any other investment opportunity</li>
 </ul>
 
</div>



Reports of potential crypto scams shot up in the middle of 2021, according to the UK’s Financial Conduct Authority (FCA), as the regulator seeks to further crack down on actors causing investor harm.



The FCA had roughly 16,400 reports of possible scams between April and September of 2021, according to agency findings published Thursday — up from 12,400 over the same period the year prior.



<a href="https://www.investopedia.com/terms/b/boilerroom.asp" target="_blank" rel="noreferrer noopener">Boiler rooms</a> were the most commonly reported scam, where fraudsters cold-call investors offering them worthless, overpriced or even non-existent shares or bonds.



The three other most common reports were of cryptocurrency scams, FCA impersonation scams and recovery rooms — where fraudsters offer to help investors who were scammed or lost money on an investment get their money back for an upfront fee.



Overall, the FCA stopped 32 new firms, or 25%, from entering the consumer investments market between April and September.



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Of the more than 16,000 scam inquiries, about 3,000 were related to cryptocurrencies — up 14% from the previous six months.



The FCA also offers a ScamSmart Warning List tool, which allows people to check the safety or risks of an investment opportunity. Cryptocurrency represents 34% of the checks, the most of any investment opportunity. The checks on crypto grew to 4,320&nbsp; — a 49% from the prior six months.



“The watchdog is swimming against an increasingly treacherous tide of scams and suspect investments,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.



<blockquote class="wp-block-quote">“Given the volatile rise of coins and tokens over the pandemic, it seems many more fraudulent operations have been launched, to take advantage of consumers’ fear of missing out on the crypto rollercoaster.”</blockquote>



The number of consumers in the UK holding cryptocurrency was estimated to be 2.3 million, according to <a href="https://www.fca.org.uk/publications/research/research-note-cryptoasset-consumer-research-2021" target="_blank" rel="noreferrer noopener">an FCA report</a> published in June.



The FCA’s cryptoasset team — responsible for supervising firms’ compliance with money laundering regulations — opened more than 300 cases relating to potential unregistered businesses in the space during the six-month period. The regulator noted that many of these businesses are likely involved in scams.&nbsp;



The FCA added 172 firms to its <a href="https://register.fca.org.uk/s/search?predefined=U" target="_blank" rel="noreferrer noopener">list of unregistered crypto businesses</a> during the period and made 10 referrals to the Advertising Standards Authority (ASA).



Crypto businesses that were already trying to register with the FCA have until March 31 to register with the regulator to continue trading. The regulator is also evaluating new applications separately.&nbsp;



The FCA is considering firms’ anti-money laundering and counterterrorist financing measures when assessing applications. Crypto market maker Wintermute announced in a Twitter post Monday that it is now registered with the FCA. But dozens of firms with temporary registrations — including <a href="https://www.revolut.com/system-status?sprediki2006/2006-19spred.htm/" target="_blank" rel="noreferrer noopener">Revolut</a>, a $33 billion neobank that includes crypto among its service offerings — are still awaiting a decision from the FCA.



“A significantly high number of businesses” are not meeting the required standards, according to <a href="https://www.fca.org.uk/news/press-releases/temporary-registration-regime-extended-cryptoasset-businesses" target="_blank" rel="noreferrer noopener">a March 2021 press release</a>, resulting in many businesses withdrawing their applications.



The latest data follows the UK government <a href="https://cms.blockworks.co/uk-government-seeks-to-boost-regulation-of-crypto-ads/" target="_blank" rel="noreferrer noopener">revealing plans in January</a> to strengthen its rules on crypto advertisements to protect consumers from misleading claims. The proposal called for bringing cryptoasset advertising under the rules of the FCA — the same standards that stocks, shares and insurance products are held to.



“It’s clear that education needs to be sharpened up pretty pronto with so many vulnerable consumers being lured in,” Streeter said. “It’s very welcome that crypto assets will soon fall under the FCA’s watch as part of new legislation.”



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Increased Scam Reports Linked to Crypto, FCA Finds

Macauley Peterson

<div id="highlights-block_61b8d639680c1" class="highlights">
 <ul>
 <li>Genesis cleared a significant regulatory hurdle with Financial Conduct Authority (FCA) approval</li>
 <li>Customers of BBVA Switzerland can now custody bitcoin and ether with the giant multinational bank</li>
 </ul>
 
</div>



The secure custody of digital assets is a critical infrastructure component enabling banks to offer regulatory compliant services at scale. Many investors, whether individuals or companies, cannot bear the burden of self-custody of digital assets, which is why custodial solutions like Genesis’ are key to allowing banks like BBVA to offer these assets.



<h3>Genesis Custody gets UK FCA OK</h3>



The digital prime brokerage Genesis Trading, a subsidiary of <a href="https://cms.blockworks.co/?s=Digital+Currency+Group" target="_blank" rel="noreferrer noopener">Digital Currency Group</a> (DCG), announced Monday that the UK’s Financial Conduct Authority (FCA) approved its Genesis Custody cryptoasset business. The FCA oversees about 51,000 financial services firms and financial markets in the country and has required crypto-related businesses to register since 2020.



<blockquote class="wp-block-quote">“[FCA] approval signifies that Genesis possesses strong controls, governance and a compliance framework committed to countering financial crime, and that the firm meets the same anti-money laundering standards as other financial institutions under the FCA’s purview,” a spokesperson for Genesis told Blockworks.</blockquote>



Genesis noted that only &#8220;a handful&#8221; of the 24 companies that have completed the <a href="https://register.fca.org.uk/s/search?predefined=CA" target="_blank" rel="noreferrer noopener">FCA registration process</a> are providers of custody services.



The firm acquired Vo1t, a custody service provider based in London in May 2020, to form the basis of Genesis Custody. Since then, Genesis Custody has onboarded about 100 customers and achieved quarter-over-quarter growth of 50% in the third quarter of 2021, <a href="https://genesistrading.com/genesis-custody-approved-by-uk-fca-as-registered-cryptoasset-business/" target="_blank" rel="noreferrer noopener">according to a statement</a>. However, Genesis does not disclose examples of clients that custody with the firm.



&#8220;This is an important milestone in our strategy to deliver to institutional clients cryptocurrency services that are compliant with the regulatory framework,” said Arianna Pretto-Sakmann, General Counsel at Genesis in the statement.



Genesis has <a href="https://genesistrading.com/crime-and-vault-risk-insurance/" target="_blank" rel="noreferrer noopener">obtained up to $600 million</a> of insurance coverage, enough to cover all assets in its custody, according to the company website.



<h3>BBVA offers EU-wide custody for ether</h3>



BBVA Switzerland, the Swiss subsidiary of Spanish multinational financial services company Banco Bilbao Vizcaya Argentaria, announced that its New Gen account product will now allow customers to invest directly in ether.



BBVA is the first traditional bank in Europe to offer ether custody services directly through a retail account, <a href="https://www.bbva.com/en/bbva-switzerland-adds-ether-to-its-cryptocurrency-custody-and-trading-service/">according to a statement</a>.



<blockquote class="wp-block-quote">“We decided to add ether to our cryptoasset ‘wallet’ because, together with bitcoin, they are the protocols that spark the most interest among investors, while also offering all the guarantees to comply with regulation,” BBVA Switzerland CEO Alfonso Gómez said in the statement.</blockquote>



The wallet, in this case, refers to the custodial service of BBVA, which uses institutional infrastructure provider <a href="https://www.metaco.com/" target="_blank" rel="noreferrer noopener">METACO</a> for its custody needs and will manage the private keys controlling users’ funds.



The bank points to the clear regulation and high adoption thresholds in Switzerland as the reason for offering this new service in the Confederation. The accounts will be available throughout Europe, but also Turkey and across Latin America.



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