How to obtain a cryptocurrency license in Great Britain

Regulation of the cryptocurrency market is constantly becoming stricter. Nowadays jurisdictions impose high regulatory and risk management requirements on virtual asset service providers.

Despite this, we always manage to find a solution that suits the client. All the time our team provides research of the market and regulations on various markets to find the best jurisdiction. Recently we have made the global overview of the VASP regulation in EEA and ready to share information with our future and existing clients. Today we will look at the features of obtaining a cryptocurrency license in Great Britain.

Tax Summary:

  1. Personal income tax – from 0% to 45%
  2. Corporate income tax – 25% 

What law/s governs VASP activities?

  1. The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (“AML act“”)
  2. Cryptoassets: AML / CTF regime – Registering with the FCA
  3. Anti money laundering supervision: detailed information
  4. Do I need to register with the FCA for carrying on cryptoasset activity? 
  5. Guidance on Cryptoassets Feedback and Final Guidance to CP 19/3
  6. PS19/22: Guidance on Cryptoassets
  7. PS23/6: Financial promotion rules for cryptoassets

What activities are included in VASP services?

Under Article 14a, the AML act VASP may provide the following services:

  1. Exchange, or arrange, or make arrangements with a view to exchange cryptoassets for money or vice versa, or one cryptoasset for another cryptoasset.
  2. Operate a machine which uses automated processes to exchange money for cryptoassets or vice versa  (e.g. an ATM).
  3. Provide custodian services for: cryptoassets on behalf of your customers and private cryptographic keys to hold, store, and transfer cryptoassets.

Who is the VASP regulator?

  1. Financial Conduct Authority (“FCA”)

What is the procedure for registering a VASP for a local company?

To legally provide cryptocurrency services in the UK, VASPs need to:

  1. Establish a local company.
  2. Have a physical office (a post office box or virtual address is not allowed).
  3. Submit an application to the FCA via the government’s Connect e-portal. As part of the application, a form must be completed. The application must include information about: the company, beneficial owners, shareholders, directors, and local contact person (the same person can be an AML officer). The following documents must be attached to the application or the information in the form must be filled in:
    • Programme of operations (description of services to be provided through cryptocurrency).
    • Regulatory Business Plan (business objectives, customers, employees, management, plans, and forecasts).
    • Structural organization chart (a description of the organization of your business, including the corporate structure, any close relationships, and group structures).
    • Jurisdictions (list of jurisdictions in which the business currently operates).
    • IT systems (details of key IT systems).
    • Criminal records and any documents that can confirm experience in the chosen business area for beneficiaries, shareholders, and directors.
    • Governance arrangements and internal control mechanisms (details of senior management responsibilities, oversight, organizational structure, budget forecasts, and finances for the first 3 financial years).
    • Anti-Money Laundering/Counter Terrorist Finance (AML/CTF) framework (description of AML/CTF schemes and mechanisms in the company, including policies).
    • Business-wide risk assessment (mechanisms for assessing the inherent risks faced by the business).
    • Financial promotions (details of business promotion/marketing policies).
    • Travel Rule (policies and procedures describing how you intend to comply with Regulations 64 A-H of the MLRs anti-money laundering rule when receiving and transmitting recipient and originator data for cryptocurrency transactions).
    • All cryptoasset public keys/wallet addresses (all cryptocurrency wallet addresses controlled by your business and used in its operations for each cryptocurrency your business operates with).
    • Customer onboarding process (details of tools/processes for screening individuals with sub-sanctions, PEP, etc).
    • Ongoing monitoring and transaction monitoring procedures (should include processes for detecting and escalating suspicious activity).
    • Record-keeping and recording procedures (must include notifying the FCA of changes to personal data)

A decision will be made within 3 months. If the application is incomplete or there are questions about business processes, structure, etc., the application may be considered for up to 12 months. Application fee: 10 000 pounds (12 000 euro).

Is there any specific authorization required for a VASP from another EU member state to provide services in this jurisdiction?

A VASP from another EEA member may provide its services to UK nationals if such VASP complies with certain restrictions.

The FCA will take into account the following factors:

  1. Commercial element: do you advertise or act in a way that suggests you are providing cryptoasset  services by way of business?
  2. Commercial benefit: do you receive a direct or indirect benefit from this service?
  3. Relevance to other business: how significant is the activity to the business’ other activities  (cryptoasset activities may be only part of the business)?
  4. Regularity/frequency: does the frequency of the activity suggest that it is being carried on as  a business?
  5. Do you have a registered or head office in the UK and do you carry on day-to-day management of these activities from this office, irrespective of where, geographically, the cryptoasset activity is conducted?
  6. Do you have any UK presence that is engaged in or facilitates cryptoasset activities?

The FCA points out that if you do not have an office in the UK or other activities in the UK (service advertising) other than having UK clients, the FCA is likely to consider that you are not carrying on a UK activity and you don’t need to register with the FCA. 

The FCA may ask you to explain why you think your activities do not need authorization. From 8 October 2023, companies advertising cryptoassets in the UK must be registered with the FCA.

What is the liability for the activities of a VASP from another EU member state without local registration/authorization in this jurisdiction?

Doing business without registering with the FCA can be punishable by up to 2 years imprisonment for top managers and an unlimited fine, which the FCA will determine on a case-by-case basis.

Manimama Legal & Growth Agency provides a gateway for the companies operating as the virtual asset wallet and exchange providers allowing to enter to the markets legally. We are ready to offer an appropriate support in obtaining a license with lower founding and operating costs. We offer KYC/AML launch, support in risk assessment, legal services, legal opinions, advice on general data protection provisions, contracts and all necessary legal and business tools to start business of virtual asset service provider.

The content of this article is intended to provide a general guide to the subject matter, not to be considered as a legal consultation.