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Amid Authorities increased focus on the regulation of cryptoassets in the UK, law enforcement agencies have carried out unprecedented raids targeting illegally-operated cryptocurrency ATMs.
It was reported on 14 February 2023 that West Yorkshire police had joined forces with the Financial Conduct Authority (FCA) to carry out a number of raids on crypto machines across the city of Leeds, following a joint investigation and a number of warning letters being issued.
Cryptoassets are not currently regulated in the UK; however, since January 2020, when the relevant amendments to the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017) came into force, firms carrying out specified cryptoasset activities have been required to register with the FCA. Those firms which have come to the FCA’s attention because they appear to be carrying on cryptoasset activity but have not registered appear in its published list of unregistered cryptoasset businesses.
There are reportedly no so-called ‘crypto ATMs’ (devices allowing customers to buy cryptoassets, or convert other currencies into crypto form) registered with the FCA; hence any working crypto ATMs are operating illegally and prime targets for the authorities.
Cryptoasset firms having been brought within the scope of the MLR 2017, and made subject to the FCA’s registration requirements, means that the authorities can carry out robust enforcement action with headline-grabbing effect. It also means that crypto firms are subject to a number of relatively onerous, positive obligations, including to carry out an anti-money laundering (AML) risk assessment, put in place AML policies and procedures, and appoint a money laundering reporting officer. The purpose of these measures is to help limit the extent to which those firms are used to launder the proceeds of crime or to provide terrorist financing, and ostensibly should provide some comfort to those dealing with them.
The MLR 2017 are of course focused on AML and financial crime prevention; bringing firms within their scope does not by any means guarantee protection from risk for consumers. Mark Steward, the FCA’s current executive director of Enforcement and Market Oversight, was quoted in the Guardian’s report on the recent crypto ATM raids as stating that, “crypto products themselves are currently unregulated and high-risk, and you should be prepared to lose all your money if you invest in them.”
Acknowledging the increasing popularity of, and concerns around, crypto, the UK government now considers that cryptoasset firms should be required to operate to the same standards as other similar financial services firms, in line with the risks they pose. This policy position was made clear in the long-awaited HM Treasury consultation paper published on 1 February 2023. This paper builds on a series of other publications in this area, including a call for evidence on the UK’s regulatory approach to “cryptoassets, stablecoins, and distributed ledger technology in financial markets” (issued in April 2022), and the government’s response to an earlier consultation on cryptoasset promotions.
The HM Treasury consultation is open until 30 April 2023. Our specialist crypto assets team will be watching developments in this area closely over the coming months.
FURTHER INFORMATION
For further information on the issues raised in this news post, please contact a member of our criminal litigation team.
ABOUT THE AUTHORs
Anna Holmes is an Associate in our Criminal Litigation team. She is an experienced criminal law practitioner who has represented clients in respect of a wide range of offences and has extensive experience in dealing with vulnerable clients.
We welcome views and opinions about the issues raised in this blog. Should you require specific advice in relation to personal circumstances, please use the form on the contact page.
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