Since the beginning of the current year, the UK's AML / CTF regulations have been in effect, in other words, the MLR Amendment. When planning to set up a crypto company in the UK, please note that this amendment also updates the transfer regulations and introduces MLD5 into UK domestic law.
The UK government, concerned about the use of crypto assets for money laundering, unveiled a detailed plan to combat economic crime for 2019-2022 last year, which includes actions related to cryptocurrencies.
Under this plan, the UK government is tightening AML / CFT rules by cryptocurrency companies. The goal of these actions is not only to keep up with the latest international standards, but also to provide one of the most comprehensive responses in the world to the use of crypto assets for illegal activities.
New UK cryptobusiness regulation
There are risks associated with cryptoasset transactions that are not covered by MLD5, and the authorized body, as part of the Consultation, requested the views of stakeholders on the following issues:
- how to translate MLD5 into UK law;
- whether it is necessary to adhere to additional requirements and provisions for those who plan to open a British exchange to work with virtual currencies or obtain a license for a cryptocurrency operator in the UK.
What has changed?
The amendment expanded the scope of the MLR, and now it applies to those who wish to obtain a license for a cryptocurrency exchange operator in Britain or apply for a license to manage electronic wallets in England.
The much broader term “cryptoasset” is now used instead of “virtual currency”. This broader term will cover:
- Product tokens: used as a medium of exchange or for investment.
- Investment tokens: usually confer rights such as obtaining ownership of a company's assets in the UK, paying off a specified amount of money or being entitled to a share of future profits.
- Payment tokens: are used to access a specific product or service provided using the DLT platform.
Obtaining a license for the UK cryptoactivities
If you are looking to obtain a UK virtual currency exchange license, your business will need to operate under the new MLR regime, which means increasing regulatory attention in this area. The UK financial regulator which controls financial activities in the country, will oversee the implementation of the plan by cryptocurrency companies. The regulator also plans to ban cryptocurrency derivatives to protect investors from financial damage.
By the way, experts of our company conduct consultations on possible risks when registering a company for cryptocurrency activities in the UK.
Under the new rules, as a regulated entity, you must:
- Conduct a money laundering risk assessment based on your services, products and customer base;
- Develop and follow internal AML procedures;
- Provide staff training on AML;
- Retain the annual report for audit purposes;
- Adopt KYC procedures and carry out customer checks.
Establish a UK cryptocompany under the new regime
Registration of a UK crypto company under the new regime must be approved by the regulator:
- New cryptoasset companies that intend to operate in 2020 must be registered prior to operating;
- Existing crypto companies can continue to operate, but must be registered by early 2021;
- Companies like e-wallets must also get authorized if their activity is in any way related to encryption.
IQ Decision UK specialists are actively following the innovations in the legislative area regarding cryptocurrencies in the UK. For more detailed information, we recommend signing up for a consultation on the regulation of cryptocurrency activities in the UK. We will also provide you with the necessary assistance when registering a cryptocompany in the UK and in the EU countries.