recent news joint raid The use of illegal cryptocurrency automated teller machines in London by the Financial Conduct Authority and the London Metropolitan Police is ostensibly a step in the right direction in the government’s efforts to clean up the sector.Chairman of the UK Treasury Selection Committee explained The UK crypto industry was dubbed the “Wild West” earlier this year, and stakeholders have been watching closely to see what concrete steps are taken to combat perceived cryptocriminal activity.
The FCA was quick to tout the ATM raid as evidence of its tough stance on malicious crypto activity. similar operation in Leeds in February. But the fact that it took him a year for regulators to act since issuing the warning in early 2022 belies the notion that regulators are prioritizing the sector.
Moreover, given the scope and scale of illegal activity across the crypto sector, shutting down a handful of automated teller machines is like a fig leaf. There is growing concern from those who want more regulation that a limited and piecemeal approach is being taken to a problem that requires a cohesive strategy.
By focusing their efforts on physical ATM raids rather than tackling online platforms, the FCA and police are building one crypto tree in the threat forest of digital assets. Due to the relatively small number of cryptocurrency ATMs, there is very little criminal activity when exchanging funds between fiat and cryptocurrencies. The number of crypto ATMs in the UK was thought to be in the hundreds before the raid, but the sector is backing up, in line with global trends since the start of “crypto winter”. It had already plummeted because it was no longer held.
money laundering remittance
ATM raids are based on the FCA’s money laundering powers, which require registration for companies offering certain types of cryptocurrency services. This enrollment program reported a very low success rate for applications, with 85% of his applications failing because key personnel lacked the appropriate knowledge, skills and experience to manage risk. It is worth noting that The registration is therefore intended to raise the bar across businesses. The operator of the ATM he targeted was not registered with the FCA, but had he been, there would have been no further regulation of ATM services.
The FCA’s money laundering and enforcement powers will be expanded with the Economic Crime and Corporate Transparency Bill. This expands powers of forfeiture and civil recovery, making it easier to seize crypto assets, for example during criminal investigations, but does not introduce further oversight over the service.
UK regulatory framework
Current and proposed broader regulatory frameworks are also restricted. The online platform is unregulated and no plans have been announced by the FCA or the government to regulate it as a whole.of the British government consultation form The Future of Financial Services Regulation for Crypto Assets, which launched in February, proposes a phased approach that places certain issuance, payment and exchange activities within the crosshairs of current regulations.
Certain services offered by online cryptographic service providers may be indirectly captured by existing Financial Services and Markets Act 2000 regimes. This indirect regulatory route could become more direct.
Amendments to the FSMA have also been announced, intended to ensure that the promotion of crypto-assets is held to the same standards as broader financial services products, with “qualifying crypto-assets” being specifically subject to restrictions and registration. It is brought within authority. requirement.
However, at this time, the regime does not appear to offer protection to those who invest directly in cryptoassets without advice, or where promotion takes place abroad. The attraction lies precisely in its democratic availability and capabilities, and this class of investors could represent the majority of UK investors.
Jurisdiction Complexity
The FCA’s promotion-based approach is perhaps understandable given the jurisdictional complexities and costs posed by a broader business-driven or cross-border approach. Cross-border regulation and enforcement requires a coordinated and coordinated effort among national regulators and law enforcement agencies. With FCA’s resources already severely scarce, it may be too expensive to run such a campaign.
Police resources to combat fraud and illegal activity are also severely limited, and the beneficiaries are likely to be criminals who seem to have flocked to the cryptocurrency sector, which has seen a surge in popularity in recent years. The lack of protection against fraud, combined with the lack of regulatory enforcement, is a potential boon for perpetrators of small and large thefts and frauds around the world.
Money laundering is also one of the most prevalent crimes in the cryptocurrency space. This is because criminals can move huge amounts of money through cryptocurrency wallets without easily identifying the identity of the wallet owner.
Future tasks
So, setting aside the possible deterrent effect of headlines, the impact of raids should not be overestimated. Of course, if the documents seized in the operation show evidence of fraud or digital asset crime, it could lead to a limited number of widespread prosecutions.
Eliminating even one villain can be good, but raids should be considered on a case-by-case basis. While it would be welcome for the FCA to finally exercise its powers in the new situation, both the scope of the operation and the length of time it took them to act still have a very long way to go. should function as a warning of
Regulators and legislators face significant challenges in working and engaging with knowledgeable cryptocurrency stakeholders to protect consumers of digital assets. Lack of resources and an overly cautious or reactive approach hamper effective regulation and the ability of regulators to keep pace with rapidly developing fields. Criminals typically take advantage of new developments and changes in the landscape quickly, while regulators tend to lag behind.
The challenge is to buck that trend and imagine a robust and flexible regulatory regime that will provide effective investor protection now and in the years to come.
This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., publishers of Bloomberg Law and Bloomberg Tax, or their owners.
Author information
Nicola McKinney A Quillon Law partner and commercial litigation expert with nearly 20 years of experience, he specializes in complex commercial and cross-jurisdictional disputes, particularly fraud and breach of trust claims. She has particular experience in matters related to digital asset fraud and crypto exchanges.
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