The UK’s top financial markets watchdog has warned that a “significantly high number” of bitcoin exchanges don’t meet money laundering standards, but that they will still be allowed to operate. For now.
The Financial Conduct Authority (FCA) made the statement as it extended the deadline for cryptocurrency exchanges to comply with the Temporary Registrations Regime from 9 July 2021 to 31 March 2022.
The Temporary Registrations Regime was established at the end of 2020 when the FCA became the regulator overseeing crypto and digital assets businesses.
Bitcoin businesses that had applied to the scheme before 16 December 2020 can continue to trade while the FCA assesses their operations to ensure they aren’t and can’t be used for funnelling money into criminals and terrorists’ accounts.
Digital assets like bitcoin and ether are often the payment method of choice for ransomware gangs.
Cryptocurrency exchanges which began operation after the December deadline must register with the FCA before conducting business.
However, the regulator has already found that many firms already assessed fail to live up to the standards of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 act.
“A significantly high number of businesses are not meeting the required standards under the Money Laundering Regulations,” the FCA said in a statement.
“This has resulted in an unprecedented number of businesses withdrawing their applications. The extended date allows cryptoasset firms to continue to carry on business while the FCA continues with its robust assessment.”
In other words: cryptocoin traders in Blighty now have until next year to comply with the law.
The financial watchdog also warned that cryptocurrencies like bitcoin, ethereum and dogecoin “are highly speculative and can therefore lose value quickly,” adding that the “FCA does not have consumer protection powers for the cryptoasset activities of firms.”
Increased bitcoin rules
The FCA bitcoin exchanges announcement comes as lawmakers and regulators around the world are intensifying efforts to reel in the Wild West of cryptocoin transactions.
Stateside, the Biden administration has announced sweeping reforms with the aim to close the tax gap, the difference between what people and companies should pay in taxes and what is actually paid.
The proposals include new rules to force businesses and people to report any cryptocoin transaction exceeding $10,000 to the Internal Revenue Service.
Beijing is in the midst of a new crackdown on digital assets. Three major financial institutions – the National Internet Finance Association of China, the China Banking Association and the Payment and Clearing Association of China – have warned their members about the speculative nature of cryptocurrencies.
At the same time, they denounced business cases for crypto, including bitcoin-based savings, insurance and trading services.
Hong Kong has followed suit in May with the city’s Financial Services and Treasury Bureau proposing new rules for digital assets.
The rules would force cryptocurrency exchanges operating in Hong Kong to be licensed by the city’s market regulators and to only provide their services to professional investors.
Iran has temporarily banned cryptocurrency mining in the country during the nation’s dry season in order to conserve energy. Bitcoin mining is famously an extremely electricity intensive activity, but not to the extent that it has such massive detrimental effect on the environment as some pundits have suggested.