Cryptoasset 5MLD FCA registration - time is running out!

Posted on: 21 October 2020

Written by: James Borley

On 10 January 2020 businesses that were conducting cryptoasset activity in the UK became subject to the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, as amended (the MLRs), and were required to be in compliance with them from that date.

In addition, they needed to ‘register’ with the Financial Conduct Authority (FCA). Although any new firms that started crypto activity after 10 January 2020 needed to become registered before being permitted to commence activities, existing firms were given until 10 January 2021 to obtain registration. Failure to become registered by that date will mean those businesses will have to cease trading.

With less than three months now remaining before the 10 January 2021 deadline there are, as at the time of writing, still only four firms registered, according to a search of the Financial Services Register. Research conducted by Compliancy Services suggests that there at least 200 firms who may well be affected.

What's gone wrong?

It would be easy to say that the FCA has got it seriously wrong. Speaking from my own experience at the regulator, it is notoriously difficult to estimate a population size for an activity that is not already regulated, or whose participants are not members of a single trade body or association. Such is the case with the cryptoasset sector, with the FCA estimating the population of firms likely to have been trading before 10 January 2020, and those looking to enter the market for the first time. From that estimate, the FCA will have predicted what resource it might require, and quite when it would be needed.

To try and manage the timing of applications, the FCA offered a ‘prioritisation’ of applications submitted before 30 June 2020. Assuming that many firms heeded that message and submitted their applications by that deadline, it is alarming that only four firms have yet been registered.

On its website the FCA states “Once we have all the information we need, we have up to three months [from receipt of the application] to assess your application.” I have underlined the first part of that statement for emphasis. This means that the FCA can take as long as it needs to assess the application, if it is not satisfied with the information being provided. And that’s not to say that it will keep going until it is satisfied; refusal of the application is a definite option.

Was this intentional?

The conspiracy theorists out there might suggest that this was all a deliberate plan to decimate the sector, even before true regulation has been introduced. You will, of course, note the FCA’s recent communication (PS20/10) banning the marketing and sale of products that reference certain types of cryptoassets to retail consumers, from January 2021.

Looking at the registration process and requirements in place, you might well agree.

It’s a registration, not an authorisation. Yet the size of the application pack and level of scrutiny being applied is reflective of the latter rather than the former (refer to my article of 13 May for further detail). Indeed, the application fee for a firm with, or projecting, crypto-income in excess of £250,000 is £10,000. An application for authorisation as an electronic money institution is ‘only’ £5,000. No wonder firms were reluctant to additionally engage with compliance consultants to help them complete their applications.

Perhaps then, this is where things have gone wrong. In an attempt to manage revenues and expenditures in the current challenging economic climate, many firms have chosen to have a go at completing the application themselves, resulting in a huge list of questions and concerns being raised by the FCA.


According to the European Commission in June, 10 EU Members had not yet transposed the Fiftth Money Laundering Directive (5MLD) into national law. Whilst that’s nothing new in itself, it does of course mean that UK cryptoasset firms may be at a disadvantage to firms domiciled in other jurisdictions where registration under 5MLD is not yet in place. This may lead to a flight for safe harbour, particularly if firms fail to get registered ahead of the 10 January deadline.

And what does the FCA do if it hasn’t determined all applications ahead of the 10 January deadline? I’m not sure it has much flexibility, given it is the MLRs which sets out the deadline. It cannot, on its own initiative, grant an extension; such an extension would have to be made by Her Majesty’s Treasury (HMT) as an amendment to the legislation. Perhaps the FCA might exercise some supervisory/enforcement forbearance, and not actively pursue the closure of firms who had yet to be registered but had applications in progress.

All this is speculation; the current situation is, if you’re not registered by 10 January you cannot engage in cryptoasset business.

How can we help you?

If you have yet to commence your application for registration under 5MLD, I suspect it’s probably too late now to expect your application to be assessed and approved by the FCA on time. Indeed, we have received reports that firms have still not had their applications opened by the FCA after three months in the ‘queue’. That said, we can provide a wide range of support services. Depending on your specific needs and your stage in the application process we can support you with services such as:

  • A fully managed, start-to-finish service to understand your business and work with you to complete your application pack
  • A review of your existing policies and procedures already submitted to the FCA
  • Assistance when responding to questions raised by the FCA
  • Assistance with your ongoing compliance needs once authorised by the FCA

If you have any questions, require support with your application or responding to the FCAs questions, our experienced team can help. 

James B

James Borley

James, our Managing Director for Payment Services, is a highly qualified financial services expert and a familiar name to many in the payments and e-money community.

Contact James

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