FCA (Financial Conduct Authority) is the British Financial Conduct Authority. It was established on April 1, 2013 and is headquartered in London, England. Its predecessor was FSA (Financial Services Authority).
FCA has inherited from the FSA the regulatory responsibilities and related prudential responsibilities of the British financial market conduct, is responsible for supervising the business conduct of various financial institutions, promoting competition in the financial market, and protecting consumers, and is directly responsible to the British Parliament and the Ministry of Finance .
According to FCA’s customer funds regulations, all customer accounts worldwide are managed separately to ensure their interests and safety, and an FSCS supplementary plan has been developed to protect investors.
The current FCA license types and scope of application are divided into the following categories:
Encryption agencies are regulated by MLR
In the revised “Money Laundering, Terrorist Financing and Fund Transfer Regulations 2017” (MLR), the UK Financial Conduct Authority (FCA) has become an anti-money laundering and anti-terrorist financing (AML/CTF) for companies engaged in certain crypto-asset activities ) Regulatory agency.
- Scope of supervision
Applicable to crypto asset exchange providers (including crypto asset automatic teller machine ATMs, peer-to-peer providers, issuing new crypto assets, such as initial coin products ICO or initial exchange products) and custodial wallet providers. Existing financial services and market law companies, electronic money institutions or payment service companies engaged in crypto asset activities will also need to apply for registration.
- How to supervise
New British companies conducting crypto asset activities within the scope of MLR must register with the FCA and comply with relevant regulations before conducting business . In addition, the FCA requires crypto-asset companies:
1. Identify and evaluate the money laundering and terrorist financing risks faced by its business;
2. Formulate policies, systems and control measures to reduce the risk of companies using money laundering or terrorist financing;
3. When appropriate to the scale and nature of its business, appoint a member of the board of directors or senior management to be responsible for complying with MLR;
4. Conduct customer due diligence when establishing business relationships or occasionally conducting transactions;
5. When dealing with customers who may bring high money laundering/terrorist financing risks, due diligence should be strengthened. This includes customers who meet the definition of a politician;
6. Continuously monitor all customers to ensure that the transaction is consistent with the customer’s business knowledge and the customer’s business and risk status.
The British regulatory agency pointed out that it will actively monitor companies’ compliance with the new regulations and will act quickly if the company does not meet the standards and poses a risk to market integrity.
UK STO regulation
According to the Guidance on Cryptoassets issued by the FCA in 2019, tokens are classified into Exchange Tokens, Utility Tokens and Security Tokens according to their economic functions. Security tokens are defined as tokens with specific characteristics that meet the definition of a Specified Investment like a share or a debt instrument, which have the characteristics of instruments such as debt or equity, and meet the definition of a Specified Investment. The issuance of STO is similar to debt financial instruments such as stocks or ownership, so it is attributed to the scope of specific investment and becomes the scope of FCA’s authority.
Just as the issuance of stocks does not require a license, companies can also issue STOs without regulatory permission, but any consultants, brokers, or any financial promotion mechanism that assists in handling token sales still need to be authorized by the FCA.
- Regulatory Sandbox Program
This year, the new British Chancellor of the Exchequer Rishi Sunak and the British Financial Conduct Authority (FCA) announced a new sandbox program. The Chancellor of the Exchequer will create a Digital Scalebox for fintech companies that want to expand their products and services, start the second phase of the FCA digital sandbox, and introduce a regulatory nursery for young fintech companies.
Currently, companies can apply for three types of FCA sandboxes:
Digital Sandbox: The concept is relatively new. So far, only a group of companies have joined the sandbox to verify their early ideas and proof of concept, and they are not supported by the regulatory sandbox.
Regulatory Sandbox: It is the sandbox with the longest running time. There are six batches of companies joining the regulatory sandbox. A company that batches real customers to test its products.
Regulatory Nurseries: For newly founded fintech companies, this is designed for newly licensed companies that require additional support.
It is reported that 108 companies have entered the six batches of regulatory sandbox programs. If some companies are not ready to start testing in the initial groupings, they may enter the sandbox multiple times. After the application deadline ends at the end of 2020, FCA has not yet disclosed the latest seventh batch of companies entering the sandbox.
FCA’s sandbox program has helped many fintech companies and large financial institutions test the waters before directly investing in new products and services. At the same time, the FCA continues to expand the scope of the regulatory sandbox pilot, including the provision of Digital Sandbox and Regulatory Nursery, which is good news for companies wishing to participate in the upcoming regulatory sandbox.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/a-guide-to-digital-currency-licenses-and-digital-asset-supervision-in-the-uk/
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