Shalini Nagarajan

<div id="highlights-block_63590bfc93163" class="highlights">
 <ul>
 <li>Under proposed measures, the Treasury would have the power to amend the definition of cryptoassets</li>
 <li>Final conclusion of the bill is set for Nov. 3</li>
 </ul>
 
</div>



UK lawmakers have voted in favor of a crypto-related amendment to the Financial Services and Markets Bill, but it could take a while until the proposed rules are enacted.



The House of Commons, the UK Parliament’s lower house, met on Tuesday for a reading of the bill, which tailors financial services regulation to UK markets post-Brexit.



The bill is intended to remodel the country’s regulatory framework, including setting out a range of measures that place the country in a more competitive financial position in the future.



The wide-ranging financial bill earlier sought to <a href="https://cms.blockworks.co/uk-to-regulate-stablecoins-as-a-form-of-payment-via-new-bill/" target="_blank" rel="noreferrer noopener">regulate stablecoins</a> as a form of payment. It now includes regulations around both stablecoins and cryptoassets, among a list of other proposed amendments by several lawmakers.



Parliament member Andrew Griffith proposed that the term cryptoasset be defined as “any cryptographically secured digital representation of value or contractual rights” that can be transferred, stored or traded electronically and uses blockchain technology.&nbsp;



New powers outlined in one clause state that “financial instruments, financial products and financial investments” may include cryptoassets. If the bill is enacted in its current form, the Treasury would have the power to amend this definition.



“This new clause amends the Financial Services and Markets Act 2000 to clarify that the powers relating to financial promotion and regulated activities can be relied on to regulate cryptoassets and activities relating to cryptoassets. Cryptoasset is also defined, with a power to amend the definition,” Griffith wrote in the <a href="https://publications.parliament.uk/pa/bills/cbill/58-03/0146/amend/finserv_day_pbc_1025.pdf" target="_blank" rel="noreferrer noopener">amendment paper</a>.



Griffith <a href="https://cms.blockworks.co/uk-proposes-bringing-crypto-under-regulatory-eye/" target="_blank" rel="noreferrer noopener">introduced</a> the amendment in parliament last week, signaling that the bill would bring crypto under its scope. That came after the UK’s Financial Conduct Authority in August <a href="https://www.fca.org.uk/news/press-releases/fca-clamps-down-marketing-high-risk-investments-consumers" target="_blank" rel="noreferrer noopener">finalized</a> stronger rules to ensure that firms marketing “high-risk investments” include better risk warnings.



Measures outlined in the bill would impact restrictions relating to the promotion of cryptoassets.&nbsp;



Alexander Tkachenko, CEO at asset tokenisation platform VNX, weighed in on the draft bill, suggesting that a variety of cryptoassets should be regulated differently.&nbsp;



<blockquote class="wp-block-quote">“Security tokens are actually regulated as financial instruments in the EU, for example,” he told Blockworks, referring to digitized versions of real-world investments such as stocks and bonds.</blockquote>



“However, utility tokens do not meet such criteria and shouldn’t fall under the category of financial instruments. If UK lawmakers follow this path, this would be in line with the EU approach to cryptoasset regulation and be positive for crypto industry development,&#8221; he said.



<h3 class="wp-block-heading">Bill introduced while Sunak was Chancellor of the Exchequer</h3>



Rishi Sunak, who recently <a href="https://cms.blockworks.co/incoming-uk-prime-minister-is-pro-crypto%EF%BF%BC/" target="_blank" rel="noreferrer noopener">bagged the top job</a> to lead the UK, helped formulate the landmark bill while he was still chancellor of the exchequer. Sunak is hailed as a “<a href="https://www.dtnext.in/business/2022/10/26/crypto-world-calls-sunak-a-champion-of-fintech-2" target="_blank" rel="noreferrer noopener">champion of fintech</a>” by the industry for wanting to make the UK a global hub for crypto technology and investment. 



“This is part of our plan to ensure the UK financial services industry is always at the forefront of technology and innovation,” he <a href="https://www.gov.uk/government/news/government-sets-out-plan-to-make-uk-a-global-cryptoasset-technology-hub" target="_blank" rel="noreferrer noopener">said</a> earlier this year about measures to adopt crypto regulation.



As part of his crypto-friendly proposals, he also proposed launching an official <a href="https://cms.blockworks.co/uk-treasury-asks-government-coin-issuer-to-mint-nft/" target="_blank" rel="noreferrer noopener">Royal Mint NFT collection</a> in April.



Sunak could help provide more clarity for crypto regulation in the UK if he follows through with his aims from earlier this year, according to Marcus Sotiriou, analyst at digital asset broker GlobalBlock.



“Liz Truss’ leadership led to political and economic instability, as the pound almost reached parity with the dollar shortly after she started her role as prime minister. It is believed that Rishi Sunak is significantly more competent when it comes to economic matters, hence potentially leading to less fear in UK markets in the short term,” Sotiriou said, adding that the new leader faces a tough few months ahead.



The bill will now proceed for a third reading, after which it will be sent to the Upper House of Parliament. A final conclusion is set for 5:00 pm UK time on Nov. 3. Recently-crowned King Charles III will be required to grant his Royal Assent for it to become law.



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UK Regulation of Crypto as Financial Product Edges Closer

Morgan Chittum

<div id="highlights-block_622b8988ee2b2" class="highlights">
 <ul>
 <li>There are 80 bitcoin ATMs or tellers in the UK, per data from Coin ATM Radar</li>
 <li>The FCA said “people should be prepared to lose all their money” if they invest in crypto assets because they are unregulated</li>
 </ul>
 
</div>



The Financial Conduct Authority (FCA) said on Friday that all crypto ATMs are prohibited from operating in the UK.



The regulator “warned” crypto ATM operators to “shut their machines down” or “face enforcement action,” according to a Friday <a href="https://www.fca.org.uk/news/news-stories/warning-illegal-crypto-atms-operating-uk" target="_blank" rel="noreferrer noopener">statement</a>.



<a href="https://coinatmradar.com/country/225/bitcoin-atm-united-kingdom/" target="_blank" rel="noreferrer noopener">Data from Coin ATM Radar</a> shows 80 bitcoin ATMs or tellers operate in the UK, none of which has been approved to offer crypto ATM services.



“We regularly warn consumers that crypto assets are unregulated and high-risk, which means people are very unlikely to have any protection if things go wrong, so people should be prepared to lose all their money if they choose to invest in them,” the FCA said in its announcement.



The news follows UK tax watchdog Her Majesty’s Revenue and Customs&#8217; confiscation <a href="https://cms.blockworks.co/uk-tax-watchdog-seizes-nfts-in-1-9m-fraud-investigation/" target="_blank" rel="noreferrer noopener">of three NFTs</a> last month in an almost $2 million fraud probe. 



Three people were arrested on suspicion of fraud as a result of the investigation. Suspects used virtual private networks (VPNs), stolen identities, fake addresses and unregistered phones to try to hide illegal activities.



This was the country&#8217;s first seizure of a blockchain-based digital collectible.



Nick Sharp, deputy director of economic crime at Her Majesty’s Revenue and Customs, <a href="https://www.bbc.com/news/business-60369879" target="_blank" rel="noreferrer noopener">told the BBC</a> that the authority is “constantly adapting to new technology to ensure [they] keep pace with how criminals and evaders look to conceal their assets.”



The use of bitcoin ATMs has come under increasing scrutiny elsewhere in the world as well. New licensing guidelines from the ​​Monetary Authority of Singapore (MAS) forced ATM operators there <a href="https://cms.blockworks.co/singapore-bitcoin-atms-shutting-down-following-central-banks-guidelines/" target="_blank" rel="noreferrer noopener">to shut down</a> in January.



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Bitcoin ATMs Illegal in the UK, Regulator Says

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.



<figure class="wp-block-image size-large"><img decoding="async" loading="lazy" width="1024" height="683" src="https://blockworks-co.imgix.net/wp-content/uploads/2022/03/chart-1024x683.jpeg" alt="" class="wp-image-18181" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2022/03/chart-1024x683.jpeg?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2022/03/chart-1024x683.jpeg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2022/03/chart-1024x683.jpeg?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2022/03/chart-1024x683.jpeg?w=386 386w, https://blockworks-co.imgix.net/wp-content/uploads/2022/03/chart-1024x683.jpeg?w=392 392w, https://blockworks-co.imgix.net/wp-content/uploads/2022/03/chart-1024x683.jpeg?w=329 329w, https://blockworks-co.imgix.net/wp-content/uploads/2022/03/chart-1024x683.jpeg?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2022/03/chart-1024x683.jpeg?w=50 50w, https://blockworks-co.imgix.net/wp-content/uploads/2022/03/chart-1024x683.jpeg?w=1200 1200w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure>



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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