Cryptocurrency has become quite a popular notion in recent years across many parts of the world, including the United Kingdom. Crypto assets are known to cover a range of products, but the most common types are Ethereum, Litecoin and Bitcoin. All of them are designed to be used as a method of payment. Kavan Choksi, a top finance expert, mentions that the UK regulates these virtual assets for the purposes of money laundering. The Financial Conduct Authority (FCA) assumed oversight of the counter-terrorism financing (CTF) and anti-money laundering (AML) activities of cryptocurrency in the country.
Kavan Choksi sheds light on the cryptocurrency related regulations in the UK
The FCA has the authority to permit the operation of an exchange that allows for the trading of crypto-assets under the Markets in Financial Instruments Directive II (MiFID II) in the United Kingdom. Businesses in the jurisdiction of FCA should comply with its crypto asset regulations accordingly. Regular consumers can purchase virtual asset products like Bitcoin in the UK with ease. The most vital factor involved in the purchase and sale of crypto assets is to make sure that the cryptocurrencies are not used for financing terrorism or money laundering. Hence, crypto businesses need to comply with FCA regulations.
FCA tends to control businesses whose customers buy and sell currencies by checking to KYC procedures in the UK. KYC can provide businesses with personal identifying information like photos, passports, driver’s licenses and customer IDs. As a result, companies are able to have data verified and check if the information given is valid and accurate. If they catch something that does not match, they may proceed with further verification or choose to not to work with a suspicious customer, depending on the risk appetite and internal policies of the company. Likewise, Customer Due Diligence (CDD) procedures are undertaken to determine customer risks, and precautions are maintained based on these risks. Such measures typically aim at complying with terrorism financing and anti-money laundering regulations in crypto businesses.
FCA has introduced a variety of arrangements that put emphasis on reducing and eliminating risks linked to trading crypto exchanges in the UK. Businesses are obliged to identify and evaluate the risks associated with AML and CFT, at the heart of FCA regulations. Subsequent to risk assessment, policies and strategies are designed to eradicate the risks. CDD and KYC procedures must be carried out as the first processes for a robust risk assessment. FCA checks on a regular basis if crypto businesses comply with KYC regulations.
FCA also stated it shall take swift actions when a business is unable to reach the desired standards of the crypto sector and risk market integrity. According to Kavan Choksi, it highlights the potential misuse of speculations, resulting from the un-clarity in the crypto sector. The FCA introduced regulatory arrangements in January 2020 for the purpose of enforcing crypto-asset businesses to control the manner they manage AML and CFT risks. Extra measures have especially been undertaken regarding crypto assets after Russia invaded Ukraine.