This briefing document examines various sources pertaining to the regulation of cryptoassets, revealing a complex and evolving landscape. The increased scrutiny focusses on potential uses of cryptoassets in money laundering, terrorist financing, and market abuse. Key themes include:

• The growing regulatory focus on cryptoassets, particularly in the UK, with the Financial Conduct Authority (FCA) actively developing rules and guidelines.

• The necessity for financial institutions to establish robust internal controls to comply with national and Union-level sanctions.

• New challenges presented by cryptoassets in the context of traditional financial regulations, requiring adaptive regulatory responses.

• Emphasis on consumer protection, necessitating financial firms to deliver clear financial promotions and conduct appropriate suitability assessments.

• Understanding the roles of market participants—such as issuers, brokers, and distributors—in relation to Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) compliance.

Key Themes and Ideas

Cryptoasset Regulation and Compliance (UK Focus):

As the UK expands its regulatory framework for cryptoassets, it seeks to address critical issues like financial promotions, market abuse, and consumer protection. The FCA plays a pivotal role in designing and enforcing these new regulations. Multiple sources highlight the FCA's initiatives in setting clear expectations for crypto firms.

1. Financial Promotions: Firms marketing cryptoassets to UK consumers must adhere to strict regulations, including clear risk warnings and avoiding misleading information. There are four lawful routes for communicating promotions; hence, all firms must prepare accordingly.

2. Registered Cryptoasset Businesses: Businesses registered under the Money Laundering Regulations (MLRs) that utilise the Article 73ZA exemption for promotions face enhanced regulatory scrutiny and enforcement from the FCA. Many supervisory powers applicable to authorised firms now extend to MLR-registered businesses using this exemption.

3. "Travel Rule": Cryptoasset businesses must comply with the "Travel Rule," which mandates the collection and sharing of information regarding the originators and beneficiaries of transfers.

4. Suitability Assessments: For cryptoassets designated as Restricted Mass Market Investments, firms must conduct assessments to ensure consumers possess adequate knowledge of specific products before sales.

5. Market Abuse: The FCA is working to adapt its Market Abuse Regulations (MAR) to the crypto arena, focusing on potential insider trading and market manipulation risks via on-chain activity monitoring, highlighting its importance.

Compliance Consultant offers financial regulatory compliance guidance, including FCA authorisation and risk management. Founded in 2000, Compliance Consultant has provided tailored solutions to firms of all sizes. You can reach us by:• Visiting our website: https://complianceconsultant.org.• Emailing us at info@complianceconsultant.org.• Calling us in the UK at 0800 689 0190.• Scheduling a call directly at: https://bit.ly/CCDiscovr.