Issue link: https://digital.shearman.com/i/1479657
U.K. Regulation of Cryptoassets (cont.) 35 Since January 2020, cryptoasset exchange providers (cryptoasset ATMs, peer- to-peer providers issuing new cryptoassets by ICO or Initial Exchange Offerings) and custodian wallet providers providing services in the U.K. by way of business have been required to register with the FCA for AML purposes. The FCA's responsibility is limited to AML / CTF registration, supervision and enforcement, and it will adopt a "risk-based approach" to supervision. Subject to Parliamentary approval, from September 1, 2023, cryptoasset exchange providers and custodian wallet providers will need to send and record information on the originator and the beneficiary of a transfer of cryptocurrency worth more than €1,000 (to include multiple linked transfers). The use of euros for the threshold may be changed during the comprehensive review of the MLRs, but at the moment, it is aligned with the FATF threshold. Anti-Money Laundering (AML) / Counter Terrorism Financing (CTF) Regime In 2019 the UKJT found that: • Cryptoassets "are to be treated in principle as property" and have "all of the indicia of property." The fact that cryptoassets are intangible, use cryptographic authentication and distributed transaction ledgers, are decentralized and operate on the basis of rules by consensus as opposed to legal rules, does not "disqualify them from being property." • Regarding the private key of a cryptoasset, however, the UKJT concluded that a private key "is not in itself to be treated as property because it is information." • The requirements for formation of a contract are the same for all contracts, whether a conventional contract or a smart contract, i.e., smart contracts can be, or be part of, binding legal contracts. U.K. Jurisdiction Taskforce • The U.K. will bring certain unregulated cryptoassets within scope of the financial promotion restriction (i.e., not into the regulatory perimeter). The financial promotion restriction provides that a firm must not communicate an invitation or inducement to engage in investment activity in the course of business unless that firm is authorized or the communication is approved by an authorized firm. Financial promotions are supervised by the FCA. • Currently, advertising of cryptoassets is supervised by the Advertising Standards Agency (ASA). The ASA aims to ensure that consumers are protected and companies comply with the U.K. Code of Non-broadcasting Advertising and Direct & Promotional Marketing (the CAP Code). The headline points include: (i) making clear that cryptoassets are unregulated and not protected; (ii) not to take advantage of consumers' inexperience or credulity; (iii) clearly stating that value can go down as well as up; and (iv) the basis used to calculate any projections or forecasts. Advertising Cryptoassets The U.K. Law Commission considers the existing laws of England and Wales insufficient in providing legal certainty as to the legal status of digital assets. The Law Commission published a consultation in July 2022 (following a call for evidence and interim update in 2021) with the intention that certainty will incentivize the use of English law and England as a jurisdiction in digital asset transactions (see slide 8 for further details). The U.K. Law Commission Cryptoassets & Insolvency