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UK CRYPTO REGULATIONS 

Understanding the UK Regulatory Framework & Processes to get crypto license.

CLIENTS

As of October 8, 2023, it has become a legal requirement for companies aiming to market cryptoassets to retail consumers in the UK to either obtain authorization or registration from the Financial Conduct Authority (FCA)or to have their promotional activities approved by a firm that is already authorized.

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CRYPTOCURRENCY REGULATIONS IN THE UK EXPLAINED

In November 2023, the Financial Conduct Authority (FCA) released new guidance following a consultation process. This guidance aims to assist crypto firms in adhering to the latest marketing regulations. Additionally, it outlines how firms that are authorized and involved in communicating or approving financial promotions should incorporate the Consumer Duty into their marketing strategies.

The summary of this guidance is as follows:

  1. The FCA established new rules for cryptoasset financial promotions, emphasizing that they must be fair, clear, and not misleading​​.

  2. This guidance aims to help firms understand and comply with these rules, aligning with the FCA's existing regulatory obligations​​.

  3. The guidance applies to all promotions communicated or approved by authorized persons or communicated by Money Laundering Regulation (MLR) registered persons​​.

  4. It acknowledges the rapidly evolving nature of the cryptoasset market and promises to keep the guidance under review​​.

  5. A significant focus is on the transparency and clarity of financial promotions, ensuring they are understandable and not misleading, especially given the novel risks associated with cryptoassets​​.

  6. Firms must consider both the substance and presentation of promotions, avoiding jargon, misleading claims, or omitting relevant information​​.

  7. The guidance reminds firms of their responsibility to accurately represent features of products or services, particularly when using terms like ‘guaranteed’ or ‘secure’​​.

  8. Financial promotions should be 'stand-alone compliant,' meaning each stage must adhere to FCA rules, and firms might use hyperlinks or separate pathways to provide sufficient information for consumer decision-making​​.

  9. The document emphasizes the Consumer Duty, which came into effect on 31 July 2023, setting high standards for retail financial services and focusing on customer understanding and support​​.

  10. The Duty requires firms to act in good faith, avoid causing foreseeable harm, and support customers in achieving their financial objectives​​.

  11. Special attention is given to the method of communication, especially for social media promotions, where firms should disclose any commercial relationships and ensure accessibility and understanding for diverse audiences​.

  12. Firms must conduct due diligence on the crypto assets or services they are promoting and any claims made in the promotions, ensuring they support good consumer outcomes and avoid causing foreseeable harm​.

  13. The document stresses that firms should form their own view of the risks of a cryptoasset and not rely solely on information provided by unregulated individuals​.

  14. Changes in the legal and beneficial ownership of a crypto asset under complex yield models must be clearly disclosed before consumers enter into agreements​.

  15. Firms are warned against giving inaccurate impressions of their regulated status and are reminded of the legal implications of falsely implying FCA authorization​.

  16. The guidance is not exhaustive, and firms are responsible for determining the extent of analysis or review needed to ensure compliance with the FCA's rules​.

Authorised persons considering approving crypto asset-related financial promotions

 

  1. Effective February 7, 2024, authorized individuals will be permitted to approve financial promotions from unauthorized entities exclusively under these circumstances: a) with a specific authorization provided by the FCA, or b) if they are covered by an applicable exemption. Those authorized persons who are contemplating the approval of financial promotions related to cryptoassets for unauthorized entities must assess if they need to obtain the FCA's approval for such actions.

  2.  Authorized individuals should not endorse financial promotions related to cryptoassets unless they possess the necessary skills and knowledge. Those who plan to approve such cryptoasset financial promotions are also advised to consult additional guidance specifically focused on the approval of financial promotions.

  3. Authorized individuals are required to verify that the promotions they approve adhere to the applicable financial promotion regulations and the pertinent rules under the Consumer Duty, ensuring they act in a manner that delivers favorable results for retail consumers who will be exposed to these promotions.

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CRYPTO REGULATION UK COMPLIANCE: NAVIGATING THE LEGAL LANDSCAPE WITH OUR SPECIALIZED ASSISTANCE.

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REQUIREMENTS FOR GETTING A UK CRYPTO LICENSE

In order to obtain a cryptocurrency license in the UK, companies must meet several specific requirements:

  1. UK Registration: The company must be registered within the jurisdiction of the UK.

  2. Local Office Presence: It is mandatory for the firm to have a physical office located within the UK.

  3. Record Maintenance: The licensee is required to keep comprehensive records of all transactions at their business location.

  4. UK-Based Director: The company should appoint a director who resides in the UK, possessing relevant business management skills and qualifications.

  5. Capital Requirements: Currently, there is no minimum share capital requirement specified for acquiring a crypto license.


Additionally, cryptocurrency businesses must comply with Anti-Money Laundering (AML) and Counter-Financing of Terrorism (CFT) regulations by establishing internal controls:

  • AML/CFT Policy Implementation: Develop and implement a policy outlining the company's strategies to combat money laundering and terrorist financing.

  • Robust KYC Procedures: Establish a thorough Know Your Customer process to authenticate the identities of customers.

  • Designation of AML/CFT Officer: Appoint a compliance officer responsible for enforcing the policy, training employees, and leading overall compliance efforts.

  • Internal Audit Function: Create an internal audit system to regularly evaluate and ensure compliance with AML/CFT standards.

It's important to note that these prerequisites are subject to change. Therefore, it is recommended to consult with Consulting24, which specializes in cryptocurrency licensing in the UK, for the most current information and detailed requirements.
 

As for the costs associated with obtaining a crypto license in the UK:

  • For businesses with UK cryptoasset income up to £250,000: The application fee is £2,000.

  • For businesses with UK cryptoasset income over £250,000: The application fee is £10,000.

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