Crypto License in the UK

Cryptocurrency Licence in the UKIn the meantime, all crypto companies should adhere to the rules inherited from the EU, the core focus of which is the elimination and prevention of money laundering, terrorist financing and other illegal circulation of funds.

UK crypto license

Crypto regulation in the UK overview

Period for consideration
9 months Annual fee for supervision No
State fee for application
from 2,350 EUR Local staff member No
Required share capital No Physical office Required
Corporate income tax 19% Accounting audit Required

Companies carrying out the crypto activities must apply for the crypto authorisation from the FCA:

  • Exchange from cryptocurrencies to fiat money and vice versa
  • Exchange from cryptocurrency to cryptocurrency
  • Crypto ATM operations
  • Provision of custodian wallet services
  • Facilitation of peer-to-peer exchange of crypto
  • Participation in Initial Coin Offerings (ICO)

Businesses that are already registered or authorised with the FCA for other activities (e.g. e-money institutions, payment services or FSMA firms) will also have to register with the authority if they are carrying out cryptoasset activities.

Crypto Legislation in the UK

The UK’s legislation for crypto assets is partially aligned with the EU, as the country adopted the AML/CFT requirements laid out in the EU’s Fifth Anti-Money Laundering Directive (5AMLD) and the Sixth Anti-Money Laundering Directive (6AMLD) prior to leaving the organisation.

UK-based crypto asset companies must comply with the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (the MLRs) which sets out obligations of private sector companies exposed to the risks of money laundering. It includes requirements for the application of customer due diligence measures which the FCA is authorised to enforce and monitor with the aim to combat money-laundering and financing of illegal activities via cryptocurrency businesses.

Cryptoasset businesses carrying on the activities listed below must comply with the MLRs:

  • Cryptoasset exchange providers (including cryptoasset automated teller machines (ATMs), peer-to-peer providers, issuers of new cryptoassets (e.g. Initial Coin Offerings (ICOs) or Initial Exchange Offerings) – companies who provide one or more of the following services, including where the companies do so as creators or issuers of any of the cryptoassets involved, when providing such services
    • Exchanging or arranging or making arrangements with a view to the exchange of, cryptoassets for fiat money or fiat money for cryptoassets
    • Exchanging or arranging or making arrangements with a view to the exchange of one cryptoasset for another
    • Operating a machine which utilises automated processes to exchange cryptoassets for fiat money or fiat money for cryptoassets
  • Custodian wallet providers – companies who provide services to safeguard, or to safeguard and administer
    • Cryptoassets on behalf of its customers
    • Private cryptographic keys on behalf of its customers in order to hold, store and transfer cryptoassets, when providing such services

In order to be compliant, crypto asset companies are obligated to:

  • Conduct AML/CFT risk assessment related to clients, country of operations, transactions and products or services
  • Implement applicable AML/CFT systems, policies, controls and procedures, including communication of all changes, which should be corresponding with the complexities of the business
  • Hire a qualified AML/CFT compliance officer who would be accountable for adhering to the applicable legislation
  • Provide training to staff responsible for implementing AML/CFT procedures and monitor their work
  • Continuously monitor transactions and be prepared to report suspicious transactions through Suspicious Activity Reports
  • Comply with CDD and KYC requirements and implement required policies through standardised workflows
  • Comply with requirements relating to identifying politically exposed persons
  • Design compliant record keeping and data protection systems and workflows that protect personal data but also ensure sufficiency of reporting records for AML/CFT purposes
  • Develop an internal audit function and continuously monitor its implementation

New legislation is to be introduced this year for the purpose of reducing economic crime. It’s also supposed to reduce bureaucracy and establish a new competitive taxation system which crypto businesses will be given a chance to benefit from.

Advantages

Prestige and worldwide recognition of the jurisdiction

Possibility to register a company fully remotely

Opportunity to obtain a licence for non-UK residents

No minimum share capital requirement

Crypto Licensing Process in the UK

To comply with AML/CFT regulations set out in Regulations 8 and 9 of the MLRs, all crypto companies must register with the FCA prior to starting their economic activities in the UK. The FCA makes a decision on complete applications within three months and, if an application is successful, issues a Part 4A Permission to carry out regulated activities. If an application is incomplete, the decision-making process might take up to 12 months and it’s usually a rejection due to withheld or false information.

When applying for registration, you shall take the following advice into consideration:

  • Prepare by reviewing online registration forms and the latest information available on the FCA’s website
  • Complete your application duly and thoroughly by fully answering every question on the application form and by providing all mandatory information (any omission will result in further information requests to your company, causing delays and continued failure to provide requested information will likely lead to the rejection of your application)
  • Provide up-to-date, specific information and documents which are fit for purpose

The department of Innovative Pathways can support the application process by explaining the complexities of the regulations, including the implications for cryptoasset business models.

Steps of the registration process:

  • An applicant settles an application fee
    • 2,000 GBP (approx. 2350 EUR) if the company’s income is less than 250,000 GBP (approx. 294,000 EUR)
    • 10,000 GBP (approx. 12,000 EUR) if the company’s income is greater than 250,000 GBP (approx. 294,000 EUR)
  • An applicant submits a completed application form via Connect
  • The FCA assigns a case officer and starts assessing the application
  • The applicant provides any additional information or evidence as per the case officer’s request
  • The FCA checks the application against various databases and information held by other regulatory agencies in the UK or overseas
  • The FCA assesses the crypto business, considering whether it meets the minimum threshold conditions (which depend on the complexity of the business) described in the Handbook
  • The FCA makes a decision on the application and issues a Part 4A Permission if the application is successful
  • The FCA confirms the decision in writing, including a Scope of Permission which states what type of regulated activities are authorised, start date and limitations of the permission
  • Upon authorisation, the Financial Services Register will be updated automatically

An application can be withdrawn during the authorisation process, in which case the application fee isn’t refunded. The applicants usually pull out when they’re unable to provide all the required information or due to missed legal deadlines.

If an application is rejected, the FCA will explain the reason for their decision and will refund the application fee. It’s possible to resubmit the application.

In addition to the authorisation application fee, authorised companies also have to pay a periodic fee which is calculated by applying a particular formula (involving application fee, company’s evaluation and calendar months) and communicated by the FCA in each individual case. In the first year, authorised companies have to pay only a proportion of the fee (based on the number of months remaining in the fee-year).

The FCA may suspend or cancel the registration of a crypto company at any time after registration if it doesn’t meet the requirements of the regulations.

Information Required to Register Crypto Business in the UK

To register successfully, it’s crucial to provide the following information and documents:

  • Programme of operations where specified cryptoasset activities for the business are set out
  • Business plan – setting out the business objectives, customers, employees, governance, plans and projections as well as business continuity plan
    • It should be detailed enough to show that the proposal has been carefully thought through and that the adequacy of financial and non-financial resources has been considered
    • It should also include details on the volume and value of transactions, number and type of clients, pricing and the main lines of income and expenses
    • Budget forecasts and financials for the first three financial years are also mandatory
  • Marketing plan should include a description of customers and distribution channels
  • Organisational structure – a description of how the company is structured and organised, including a corporate structure chart and a description of relevant outsourcing arrangements, if any (the FCA may ask for a copy of the outsourcing contract)
  • Systems and controls – details of the key IT systems the company will use for the economic activities, including details of IT security policies and procedures
  • Directors and any other persons who are or will be responsible for the management processes, must prove that they have a good reputation, and have the appropriate knowledge and experience to act in this capacity
  • Details of governance arrangements and internal control mechanisms in place to identify and assess risks and a description of money laundering and counter terrorist financing control measures
  • AML/CFT framework and risk assessment: this should highlight the risks specific to the proposed economic activities and provide details on how the applicant will mitigate those risks, including staff training material
  • Business-wide risk assessment should include monitoring and mitigation policy
  • All cryptoasset public keys/wallet addresses, including all of the cryptoasset addresses controlled by the applicant and used in the activity of the business for each cryptoasset that the business deals with
  • Customer on-boarding agreements and process
  • Customer due diligence and enhanced due diligence procedures, meeting the minimum requirements laid out in the relevant legislation
  • Transaction monitoring procedures
  • Record-keeping and recording procedures
  • Money Laundering Reporting Individual forms for all directors, executives and officers
  • Beneficial Owner forms for shareholders

Pursuant to AML/CFT regulations, any officer, manager and beneficial owner engaging in the crypto business, is subject to the fit and proper requirements under Regulation 58A of the MLRs. They are required to pass the fit and proper test before the business can be fully registered, or remain registered, with the FCA.

The test must be taken by:

  • A partner in the company
  • A director of the company
  • A board member or nominated officer responsible for compliance with the regulations
  • A nominated officer for reporting suspicious activity reports to the National Crime Agency
  • A beneficial owner, who owns or controls more than 25% of the shares or voting rights in the company
  • Other individual performing a role of similar influence or responsibility

Overall, the aim of the documentation is to ensure that an applicant complies with the AML/CFT legislation and will be able to successfully operate in the market.

How to Open a Crypto Company in the UK

Before registering with the FCA, it’s mandatory to establish a company in the UK. One of the most popular business structures in the UK is a Private Limited Company (Ltd). The advantages include protection of personal assets, tax planning and reductions and even enhanced professional image. A new company can be set up from abroad.

There are no requirements for a minimum share capital. A prerequisite for establishing a Private Limited Company in the UK is at least one shareholder and one director, who can be the same person and a non-resident of the UK.

To qualify for the registry with the FCA, a crypto company must:

  • Be incorporated in the UK
  • Have a physical office in the UK (PO box isn’t allowed)
  • Open a corporate bank account for operations and cryptocurrency transactions
  • Collect and maintain records at the place of business or registered office of all transactions concerning any payments made
  • Comply with the AML/CFT requirements

A crypto company is obligated appoint a person to be responsible for AML/CFT compliance, to monitor and manage compliance with policies, procedures and controls relating to money laundering and terrorist financing and to act as the nominated officer under the Proceeds of Crime Act 2002. According to the FCA, this person should have relevant knowledge, experience and training, also a level of authority and independence as well as sufficient access to resources and information which should enable them to carry out that function.

Steps of opening a Private Limited Company in the UK:

  • Choose a unique name that should include either Limited or Ltd
  • Choose directors and a secretary
  • Choose either shareholders or guarantors
  • Identify people with significant control over the company (e.g. voting rights)
  • Prepare a Memorandum of Association and Articles of Association
  • Identify the scope of company and accounting record keeping
  • Register a company with Companies House (including registering an official address and obtaining a SIC code)
  • Register a company with HMRC for Corporation Tax
  • Submit an application for cryptoasset authorisation to the FCA

Crypto Tax in the UK

While a thorough crypto regulatory framework is yet to emerge in the UK, Her Majesty’s Revenue and Customs (HMRC), the UK’s tax authority, has already published the Cryptoassets Manual, where all the crypto-related tax liabilities are explained within the structure of the existing legislation. Read more here Crypto Tax in the UK.

 

If you’re planning to register your crypto company with the FCA in the UK, our experienced and dynamic team of Regulated United Europe (RUE) is here to help. We offer comprehensive advice on crypto company formation, crypto license, accounting and taxation and guarantee efficiency, confidentiality as well as meticulous attention to every detail that impacts your business success. Contact us now to receive a personalised offer.

COST OF CRYPTOCURRENCY LICENSE

PACKAGE «COMPANY & CRYPTO LICENSE IN THE UK»

88, 900 EUR
THE PACKAGE OF «THE COMPANY AND CRYPTO LICENSE IN THE UK» INCLUDES:
  •  Preparation of business plan, company management structure and other financial documents
  • Company formation in the UK
  • Application for authorization with the FCA
  • Correspondence with the Case Officer appointed by the FCA and final decision on the share capital requirements
  • Appointment of the necessary staff
  • Bank account opening

FREQUENTLY ASKED QUESTIONS

  • Does the UK grant a licence for crypto activities?
    Yes, but formally it is not called a license. .
  • How do I get a crypto license in the UK?
    Individuals wishing to partake in business-related crypto activities in the UK are obliged to register with the Financial Conduct Authority (FCA).
  • What are the activities of the crypto license in the UK?
    Once the FCA grants authorization, registered crypto service providers may take part in the following activities:
    • Safeguarding and/or administer clients’ crypto assets
    • Offering crypto to crypto and fiat to crypto exchanges
    • ICO and ITO
  • How long does it take to get a license?
    If the application is complete and the FCA does not request any further information of documents, the decision will be delivered within 6 months from the application date. However, this is often not the case. If the FCA asks for further information, the applicant must submit it within 3 months.
  • Can non-residents of the UK own a crypto company?
    Yes, but the director of a crypto company ik the UK must formally reside in the country.
  • Is it necessary to have a banking account to obtain a licence?
    Opening a bank account is not a formal requirement for establishing a crypto company in the UK. However, having one is highly recommended.
  • What is the minimum authorised capital for a virtual currency service provider?
    There is no formal requirement for the minimum authorised capital amount.
  • For how long is a crypto-license issued?
    As it is not a formal license but rather an authorization, it does not have an expiration date.
  • What does a crypto company need to apply for an FCA authorization in the UK?
    In order to register as a virtual asset service provider in the UK, the applicant must fulfil the following criteria:
    • Have an established company in the UK with a local office
    • Maintain all records related to transactions that have been made under the license in the place of business
    • Hire a director and an anti-money laundering officer that fulfil the formal requirements (necessary professional background and knowledge, clean criminal record etc.)
    • Gather all the reports and documents that are necessary for the application.
  • Why you should get a crypto license in the UK?
    There are a few solid reasons why it is worth establishing and running a crypto company in the UK. To begin with, the UK is a highly trusted regulatory framework in Europe that supports crypto trade. From a more general perspective, the UK is also a Fintech hub, providing a dynamic environment that’s full of networking and development opportunities. Finally, the process of registering with the FSA is rather straightforward, allowing applicants to ensure a streamlined and smooth application if the necessary information is collected thoroughly.
  • Can the director of a crypto company be a non-resident of the UK?
    No. The director must be a resident of the UK. In addition, the company must have a local office.
  • What measures to prevent money-laundering and the financing of terrorism are in place in the UK?
    UK crypto companies must hire a competent AML officer and establish a detailed and clear AML policy.
  • What difficulties may arise in obtaining a crypto license in the UK?
    In order to receive authorisation from the FSA, applicants must fulfil the necessary conditions. Consequently, difficulties may arise if the information submitted to the FSA doesn’t match the requirements or is otherwise insufficient. Further difficulties may arise if the applicant fails to establish a comprehensive risk management network and policies that depend on the estimated size and complexity of the crypto business.

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At the moment, the main services of our company are legal and compliance solutions for FinTech projects. Our offices are located in Tallinn, Vilnius, and Warsaw. The legal team can assist with legal analysis, project structuring, and legal regulation.

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Registration number: 14153440
Anno: 16.11.2016
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