Cryptocurrency Regulation In The UK
Cryptocurrency Regulation
The UK government introduced cryptocurrency regulation that requires crypto firms operating in the UK from 1 September 2023 to collect, verify and share information about crypto transfers. This cryptocurrency regulation is known as the Travel Rule that the UK adopted, which aims to prevent money laundering and illicit or illegal activities.
They also have a financial incentive to require crypto transfers to be collected and shared. Capital Gains Tax would be a prominent area that would receive attention.
The UK legislation was informed by the work done by the Financial Action Task Force (FATF) globally.
On 8 October 2023, the UK government introduced the Financial Promotion Rules for crypto assets.
The government via the Financial Conduct Authority (FCA) are implementing new rules for cryptocurrency firms, companies and exchanges that market to UK crypto users. The cryptocurrency regulation aims to make the marketing of crypto products more transparent and accurate.
What changes do firms offering crypto services in the UK need to implement?
Crypto asset companies’ marketing must be clear, fair, and not misleading. Risk warnings must be given, and they must be prominent to users. A 24-hour cooling-off period must be in place for first-time investors with a firm that promotes direct offers. There shouldn’t be inappropriate incentives for people to invest. Incentives, like refer a friend or new joiner bonuses or rewards, are now banned for users in the UK.
Crypto firms that are not ready to implement these changes at this point can apply to the FCA for an extension going up to 8 January 2024.
Which exchanges operating in the UK conform with the new cryptocurrency regulation?
You can search the FCA register to see if an exchange is authorised and regulated.
While the list of exchanges that conform is likely to remain fluid, the current list includes the following:
- Kraken has partnered with a company called Payward Ltd in London. Payward Ltd are authorised and registered for certain crypto activities.
- Coinbase has partnered with Archax Ltd to provide its crypto financial promotions.
- OKX has also partnered with Archax Ltd to meet the FCA requirements.
- Crypto.com has also partnered with London-based company Foris Dax Ltd.
Others approved by the FCA include Uphold Europe Ltd, Coinjar Ltd and Bitstamp Ltd.
PayPal is approved, although it halted crypto activity until the January 2024 deadline so that it can prepare.
If you attempt to send money to exchanges that the FCA does not approve, you will likely find that the Bank you are using will block the transactions. In addition, some Banks will limit the amount that you can transact.
The UK is not alone. Many governments globally are implementing regulation into the crypto market to centralise it.
The positives could be the increased institutional adoption of cryptocurrencies into the broader financial system, which would grow the crypto market. The alternative perspective is that it’s just an excuse for the government to increase centralisation to ensure control so that they can monitor the crypto industry and intervene where they see fit. A significant disadvantage for those looking for more decentralisation and sovereignty of their own money or assets.
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