In a new policy update published Wednesday, the U.K. Financial Conduct Authority (FCA) added cryptocurrency-related businesses to the list of firms that must submit an annual financial crimes report.
The report, better known as REP-CRIM, helps the FCA determine the likelihood of a financial firm being involved in money laundering and other illegal activities. Until now, the reporting rule only applied to banks, building societies, and other firms that handle money.
However, the FCA said as part of its latest update that “additional firms and crypto-asset businesses should be brought into scope of the [report] based on their business activities and the potential money laundering risks.”
The addition of new firms and crypto-asset businesses increases the number of UK firms submitting REP-CRIM from 2500 to roughly 7000, and FCA believes such oversight is necessary to protect the region’s financial system.
Plans to include crypto firms such as exchanges and custodial wallet providers under the reporting scheme have been in the works since August last year when the FCA first released its policy update proposal for public consultation.
The public consultation process ended in November, and the rules have now gone into force.
As per the FCA’s earlier proposal, both cryptocurrency exchanges and wallet providers will have to submit a report irrespective of the amount they generate in revenue annually. These firms can start reporting on the next accounting reference date after 10 January 2022.
FCA Steps Up Crypto Regulation
Alongside adding UK crypto firms to its REP-CRIM reporting list, the FCA is currently handling a backlog of applications from businesses seeking an operating license. The watchdog recently enacted a temporary registration regime, allowing under-review firms to keep servicing users until a verdict is made on their application.
The introduction of these regulations brings more clarity and will undoubtedly make mainstream investors more comfortable to invest in cryptocurrencies, further attracting an inflow of capital to the booming industry.