Syed Rahman of financial crime specialists Rahman Ravelli considers what might happen next.
As many as 2.6 million people in the UK are now holding digital assets.
The figure comes from a report on cryptoassets by the Financial Conduct Authority (FCA). The report outlines a surge in cryptoasset popularity since 2018.
Two years ago, the FCA and the Bank of England were even considering a possible ban on selling to retail consumers derivatives that referenced certain types of cryptoassets.
With the Fifth Anti-Money Laundering Directive (5MLD) coming into force in January this year, the FCA became the anti-money laundering and counter-terrorist financing (AML/CTF) supervisor of UK-based cryptocurrency businesses. Since then, according to its report, there has been a drop in UK-based illegal cryptoasset activity. But the report stresses that the FCA “continues to work with the government and Bank of England, as part of a UK Cryptoassets Taskforce, to understand and address the potential harms from cryptoassets and encourage innovation in the interests of consumers.”
In this year’s budget, the UK government announced plans to consult on “bringing certain cryptocurrencies into the scope of the financial promotions regulation”.
The FCA’s report highlights the popularity of cryptoassets and indicates that the agency is starting to plough resources into that sector.
Cryptoasset-related businesses must now start to familiarise themselves with what could potentially constitute financial promotion regulation. It remains to be seen what approach the FCA will take. The reality is that the FCA will eventually introduce regulatory powers and firms will then need to consider whether they should be regulated or not. More importantly, firms will need to understand the consequences of breaching any regulatory powers that will be introduced.
This article originally featured on Mondaq, it can be read here.