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Cryptoassets: the ever-prevalent need for regulatory oversight

Updated: Jun 10

Last year the Chinese police made their first arrest for Central Bank Digital Currency (CBDC) money laundering. Chinese officials arrested members of a criminal organisation for alleged money laundering using the country’s CBDC (digital yuan). Given the news, it marks a pivotal point in the Chinese cryptoasset market and highlights the need for further government and regulatory oversight.


It is not a great surprise that this was uncovered; given the size of the Chinese economy and hence its attraction for criminal enterprises, but because the digital yuan is now used by more than 10% of China’s population[1]. Also, due to the increasing popularity of cryptoassets across all countries, calls for tighter regulations and increased oversight.


For instance, as of June 2021 in the UK alone, there were over 200 cryptoasset firms, with only 90 gaining temporary registration with the Financial Conduct Authority, (FCA[2]) at the time. In January 2020, new regulatory powers were introduced to allow the FCA to supervise how crypto businesses manage the risk of money laundering (ML) and counter-terrorist financing, (CTF). Currently in the UK, all cryptoasset firms must comply with the Money Laundering Regulations (MLRs) and register with the FCA[3].


Even Dubai, which is on the Financial Action Task Force (FATF)’s ‘grey’ money laundering watchlist, introduced the Virtual Assets Law (VAL) in February. The Virtual Assets Law, establishes VARA (the Virtual Asset Regulatory Authority) as an independent regulatory body that sits within the Dubai World Trade Centre (‘DWTC’), tasked to regulate exchanges, wallet providers, digital issuers and all other activities related to cryptoassets[4]. The regulatory body intends to facilitate collaborative engagement between cryptoasset service providers and international regulatory authorities.


How Can Lysis Help?


Lysis Group is an established financial services firm with years of experience in the cryptoasset market. Whether you are a custodian wallet provider or a digital issuer, we can aid in financial registrations as well as other regulatory conversations/requests by your relevant regulator. This includes, (but is not limited to):

  • Assist in the completion of the necessary forms, including ownership disclosure forms and Approved Persons Forms;

  • Provide on-going advice on the regulated activities for which your firm will require regulatory permissions;

  • Provide details as to the broad regulatory obligations specific to your crypto related activities;

  • Review and provide guidance regarding governance, systems, and controls of your firm;

  • Review the competency requirements for senior management and other staff, including the nominated officer (MLRO); and

  • Help prepare a Regulatory Business Plan, where required;

  • Provide advice and support to senior management for meetings with the designated regulator.


For more information, contact us at: info@lysisfinancial.com


 

Lauren Parmenter

Senior Consultant


[1] https://www.ledgerinsights.com/china-catches-fraudsters-central-bank-digital-currency-cbdc-for-money-laundering/ [2] https://www.fca.org.uk/cryptoassets-aml-ctf-regime/register [3] https://www.fca.org.uk/consumers/cryptoassets [4] https://coincentral.com/dubais-vara-to-establish-worlds-first-metaverse-hq-in-the-sandbox/

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