FCA Looking For Crypto Experts To Combat Crime

November 25, 2021
The UK's Financial Conduct Authority (FCA) is looking for a third-party provider that can help the regulator with the analysis of crypto-asset blockchain data and effective supervision.

The UK's Financial Conduct Authority (FCA) is looking for a third-party provider that can help the regulator with the analysis of crypto-asset blockchain data and effective supervision.

On November 15, the FCA posted a tender notice, seeking to hire a third-party provider that can offer a platform to help analyse crypto-asset blockchain data. The contract would last almost two years.

Perhaps looking to manage expectations over price, the regulator was also willing to disclose that for the contract it would be willing to pay £500,000.

Specialist help

To support its supervisory duties, the regulator said it is looking for a specialist firm, “who can provide access to a platform that can support the robust and efficient analysis of crypto-asset blockchain data and provide training, and ongoing support in the use of this platform”.

The notice stresses that the analysis of crypto-asset blockchain data is an “essential aspect” of the FCA toolkit.

“The development of this capability is closely aligned with operational objectives of the FCA and has applications in the prevention of harm to consumers, in enhancing the integrity of the UK financial system and in promoting competition.”

The FCA seeks a blockchain analysis solution that helps the agency analyse crypto-asset blockchain data, respond to the risks identified during this analysis, and support the effective supervision of crypto-asset activity, including the development of intelligence and enforcement investigations.

“The decentralised nature of the digital currency, while potentially demonstrating benefits, has provided criminals with an ideal asset for criminal abuse. They transcend governmental and national oversight and regulating it has been an uphill battle since its rise to mainstream popularity over the last decade,” said Henry Balani, global head of industry and regulatory affairs for Encompass Corporation.

“There is still a long way to go before cryptocurrency is no longer used as a vehicle for laundering money or enabling other forms of financial crime throughout the UK. The FCA has made a step in the right direction in enlisting third-party expert services to weigh in on the issue, but this problem is so complex that it will require more than just the regulator to solve it,” he added.

Therefore, Balani urged private financial services firms to take responsibility and get ahead of the issue before the regulator forces them to.

Regulating since 2020

The FCA became the anti-money laundering and counter-terrorist financing (AML/CTF) supervisor for cryptocurrency firms in January 2020.

The regulations require crypto-asset firms to obtain a licence from the FCA and implement effective AML/CTF policies.

Those crypto-asset firms that had been operating before the new law came into effect in January 2020 had one year to register with the FCA, but new crypto-asset businesses, formed after January 2020, must obtain full registration with the FCA before carrying out any crypto activity.

Although the FCA has had almost two years to register the applicants, to date it has registered just 19 firms, with a further 46 firms waiting under the agency’s temporary registration regime.

In its annual perimeter review, the regulator revealed that 90 percent of the applicants had chosen to withdraw their applications or were being refused, and this is largely due to the poor quality of the applications or because the regulator identified significant concerns during many of the assessments.

By contracting third-party experts, the FCA is recognising it needs help with its analysis of this fast-developing industry and will hope to get ahead of the game and improve the efficiency and effectiveness of its regulatory duties.

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