The UK Treasury has recently announced that crypto businesses involved in issuing non-fungible tokens (NFTs) will likely need to register with the Financial Conduct Authority (FCA), even after a new authorization regime for the cryptocurrency industry is introduced. This statement was part of a consultation on money laundering released on Monday, aiming to enhance the regulation of the crypto market.
Currently, crypto exchanges and custody providers are required to register with the FCA to operate within the UK, ensuring compliance with anti-money laundering and counter-terrorism financing safeguards. This requirement is set to change with the new regulatory regime; however, NFT issuers will still need to be registered and supervised by the FCA for these purposes.
NFTs, which are blockchain-based tokens representing ownership of unique items or assets, typically art, do not generally engage in regulated financial services and thus might not fall under the new crypto authorization regime. The necessity for registration is based on the broader aim to mitigate risks associated with money laundering and terrorism financing within the crypto space.
The Financial Services and Markets Act, passed last year, marked a significant step in integrating crypto activities within regulated financial operations. Despite this, the government has clarified that NFTs, unless used for regulated activities, are not considered appropriate for regulation as a financial service. The consultation document also suggests that the scope of firms needing registration could expand as the crypto industry develops.
The government is seeking feedback on this proposed regime until June 9, as it continues to refine its approach to cryptocurrency regulation in the UK, highlighting the ongoing efforts to balance innovation with financial security and integrity.