The UK's financial watchdog released a 57-page Consultation Paper on Monday, revealing the expansion of its oversight of the financial services sector to include crypto startups and exchanges in a move aimed at further clamping down on money laundering crimes.
The Financial Conduct Authority (FCA) has plans to legally bind all crypto-related companies to report all financial crime activities to understand their susceptibility to money laundering. The FCA said the consultation period is open for feedback from interested parties until 23 November 2020.
"Money laundering creates significant harmful side effects in financial markets and the wider society," the FCA states in the document. "Money laundering involves the allocation of capital to where it can easily be disguised, distorting prices and markets, and reducing public benefit."
Money laundering costs the global economy anywhere from $800 billion to $2 trillion each year, which is equivalent to 2% to 5% of the world’s gross domestic product, the United Nations recently reported. It added that currently 90% of all money laundering still goes undetected.
Richard Ells, CEO of the UK-based crypto startup Electroneum, highlighted how much more burdened the FCA will be now that it has expanded their oversight to include crypto-related businesses.
“The FCA already regulate the conduct of nearly 60,000 businesses and supervise 49,000 firms as well as set standards for 19,000 more companies, while only having a few thousand employees. We’ve been impressed with how they are integrating an entirely new FinTech sector” said Mr. Ells, praising the results they deliver.
The FCA expresses further concern that money laundering facilitates crime such as fraud, drug trafficking, corruption, and terrorism. It adds that the crime of laundering money reduces economic activity and societal wellbeing.
The financial watchdog said regulations are designed to incentivise financial firms against incurring in money laundering. Their proposal to extend criminal reporting would mean that about 4,500 more UK financial companies, including crypto-related, would report annually.
"We will use the data to assess the nature of financial crime risks within the crypto-asset business sector," the FCA said in Annex 2, which explains the new crime report form crypto-asset businesses are now obligated to fill and submit.
Developing strict rules for crypto
A report by Inside Bitcoins suggests, "the FCA appears to be developing a strict regulatory scheme for its crypto industry."
The news outlet refers to a June FCA statement calling on all crypto companies in the UK to register to the financial authority, who said all applications would have been processed by no later than 10 January 2021. Failing to comply with the registration will lead to a default, the FCA warned.
In July, the HM Treasury launched an Open Consultation saying its objective is to increase its oversight into crypto-related promotions to protect investors, with the new supervisory role falling to the FCA.
While governments and financial services experts claim that cryptocurrency is a money laundering concern, a report by Bitcoin.com says that it is far easier to launder fiat than it is crypto.
Electroneum welcomes all regulations
Richard Ells welcomed the consultation paper and the introduction of new rules aimed at clamping down on money laundering crimes.
"Although cryptocurrency has the power to change the world for the better, we should always embrace regulations where the authorities are working to protect consumers from a myriad of global threats," said Mr. Ells.
"We embrace any regulatory environment that protects people, while still allowing the poorest people in the world to access, enhance and benefit from the UK and global digital economies," the award-winning crypto startup's founder added.
"Electroneum was ahead of the curve when we voluntarily wrote and adopted an anti-money laundering (AML) layer to our custodial wallet application two years ahead of any regulatory requirement to implement one," he added.
Mr. Ells went on to say that, "we've already seen the FCA's paper on the Extension of Annual Financial Crime Reporting Obligations. We are happy to report that once again, we've assumed this was coming. Therefore, we have already created extensive data analysis of this type and implemented some third-party systems that mean we are ready for this, even though it's only in the consulting stage."
Because Electroneum is all about using cryptocurrency (ETN) to empower the unbanked people of the world, the UK-based Cryptocurrency startup became the first crypto in existence to adopt KYC/AML procedures in 2018.