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HM Treasury has confirmed that it will bring certain unregulated cryptoassets within scope of the financial promotions regime.

By Stuart Davis, Rob Moulton, and Charlotte Collins

On 18 January 2022, the UK government confirmed its intention to bring the promotion of certain cryptoassets into scope of regulation. HM Treasury has been considering for some time whether, and if so how, to bring unregulated cryptoassets within the regulatory perimeter, having originally consulted on these proposals in 2020.

HM Treasury is planning significant changes to the financial promotion regime, including expanding its scope to certain cryptoassets, and amending the approval process for promotions of unauthorised firms.

By Stuart Davis, Sam Maxson, and Anna Lewis-Martinez

On 20 July 2020, HM Treasury published two consultation papers on a regulatory framework for approval of financial promotions and cryptoasset promotions. The consultations propose to establish a regulatory “gateway” that a firm must pass through before it is able to approve the financial promotions of unauthorised firms, and to bring certain types of cryptoassets into the scope of financial promotions regulations.

The Fintech Strategic Review aims to ensure the ongoing growth and success of UK fintech as a world leader in financial innovation.

By Stuart Davis and Anna Lewis-Martinez

On 20 July 2020, HM Treasury announced the launch of an independent review into the UK’s fintech industry to “identify opportunities to support further growth in the sector”.

The Fintech Strategic Review aims to establish priority areas for industry, policy makers, and regulators to explore in order to support the continuing success of the UK fintech sector. The review will be led by Ron Kalifa OBE, the former CEO of Worldpay and non-executive director of the Court of Directors to the Bank of England. According to Kalifa, “Technology has a vital role to play in the UK’s COVID-19 economic recovery. The fintech review will ensure that we can leverage this innovative technology to help consumers and businesses, through a joined-up strategy that combines investment, skills and policy to deliver it.”

New regulatory requirements, including registration and customer disclosure requirements, apply to regulated and unregulated persons carrying on relevant cryptoasset business.

By Stuart Davis and Sam Maxson

On 20 December 2019, the UK government published the Money Laundering and Terrorist Financing Regulations (Amendment) Regulations 2019 (the Amending Regulations). The Amending Regulations update the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (the MLRs) to meet the UK’s obligation to transpose Directive (EU) 2018/843 (5MLD) into UK law. A key element of the Amending Regulations is that they bring Cryptoasset Exchange Providers (CEP) and Custodian Wallet Providers (CWP) — including persons making an initial coin offering (ICO) — within the scope of UK money laundering regulations. Therefore, from 10 January 2020 CEPs and CWPs are required to comply with the requirements of the MLRs (subject to limited transitional provisions for existing cryptoasset businesses relating to registration with the FCA). Significantly, the Amending Regulations will impact any UK person conducting cryptoasset business of a kind that is captured by the new definitions of CEPs and CWPs (including, for example, existing UK authorised financial services firms that carry on cryptoasset business which will be subject to new requirements relating specifically to cryptoasset business).

HM Treasury consulted on its proposed changes in April 2019 in its paper Transposition of the Fifth Money Laundering Directive: Consultation (the Consultation Paper). As the UK has not yet formally withdrawn from the EU, its approach to implementing the changes introduced by 5MLD is not impacted by Brexit and it is anticipated that the UK will continue to apply EU financial regulatory standards (including anti-money laundering (AML) requirements) immediately post-Brexit through “onshored” legislation.