The Financial Conduct Authority has warned that a "significantly high number" of cryptoasset businesses are not meeting money laundering standards.
In an update today (June 3), the regulator said it was conducting a “robust assessment” and had seen an unprecedented number of businesses withdrawing their applications after not meeting Monday Laundering Regulations standards.
Last year in December, the FCA launched the Temporary Registrations Regime for existing cryptoasset businesses, to allow those who have applications still being assessed to continue trading.
Today it has extended the end date of the TRR from July 9, 2021, to March 31, 2022 which will allow cryptoasset firms to continue trading while the FCA proceeds with its assessments.
Anti-money laundering and counter terrorist financing legislation are aimed at protecting against the transfer and disguise of funds from criminal activity, or funding of terrorist groups.
While this is not the only element that the FCA will assess in relation to an applicant, the FCA said it will only register firms where it is “confident that processes are in place to identify and prevent [money laundering]”.
This comes as earlier this year in January, the City watchdog warned investors in cryptoassets promising high returns that they must be "prepared to lose all their money".
In its cautionary note against what are often viewed as high risk investments, the FCA said it was aware of some firms offering investments in cryptoassets which "promise high returns".
The regulator also said that it does not have consumer protection powers for the cryptoasset activities of firms.
“Even if a firm is registered with the FCA, it is not responsible for making sure cryptoasset businesses protect client assets (ie customers’ money), among other things," it said.
“Cryptoassets are considered very high risk, speculative investments. If consumers invest in cryptoassets, they should be prepared to lose all their money.”
It warned that it is unlikely consumers will have access to the Financial Ombudsman Service or Financial Services Compensation Scheme, irrespective of whether a firm has temporary or full registration.
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