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​Cryptocurrency: Increased regulation leads to strategic recruitment

MERJE’s Financial Crime & Fraud team has seen a distinct rise in recruitment for the cryptocurrency market, as well as financial services organisations which have crypto exposure, as the Financial Conduct Authority cracks down on unregulated cryptoasset firms.

Binance, the world’s largest cryptocurrency exchange, was recently banned from “all UK regulated activities” by the Financial Conduct Authority in the latest sign of a growing clampdown on the crypto market around the world.

Originally set to launch its own digital asset marketplace in Britain, Binance was one of several crypto firms that withdrew applications to register with the FCA due to not meeting anti-money laundering requirements.

Businesses offering crypto-related services are currently required to register with the FCA after it became the anti-money laundering and counter terrorist financing (AML/CTF) supervisor for these types of firms.

The regulator introduced the Temporary Registration Regime, which allows crypto asset firms to carry on doing business while the FCA continues with the assessment of firms whose applications haven’t yet been approved, working to a new deadline of March 31, 2022.

According to the FCA, a “significantly high” number of businesses are not meeting the required standards under the Money Laundering Regulations, causing an unprecedented amount of businesses to withdraw their applications.

These unregistered crypto asset firms pose a risk to the broader financial system and the FCA has warned consumers, banks and payment services companies against dealing with them.

Cryptocurrencies like Bitcoin have long been hindered by worries over their use in financial crime activities like money laundering and cyberattacks because the people transacting them don’t reveal their identity.

Officials have also warned about the speculative nature of crypto assets and, after the FCA’s announcement, many banks have been issuing warnings about fraudulent cryptocurrency trading and, in some cases, suspending payments to crypto exchanges.

In January, the FCA issued a stark warning to cryptocurrency investors: “Investing in crypto assets, or investments and lending linked to them, generally involves taking very high risks with investors’ money,” the regulator said. “If consumers invest in these types of products, they should be prepared to lose all their money.”

The FCA later reiterated its stance, warning that many cryptocurrencies are “highly speculative and can therefore lose value quickly.”

As organisations await the increased regulations across this emerging sector, we’ve observed that institutions with a focus on Risk Management who are keen to ensure they are prepared, are investing more in their Risk, Compliance, Financial Crime and Fraud teams.

An increased focus on strategic decision making roles at senior management level, which hold control function responsibilities, has resulted in a marked rise in hires across these disciplines, as businesses pursue a collaborative approach, working in tandem with regulators.

From the feedback we’ve received so far, this is because many businesses are taking their Compliance obligations seriously and are actively keeping abreast of changing policies, rules and laws in this new space.

For our part, we believe that it’s imperative for businesses to invest in this area if they are to navigate the FCA’s strict guidelines that will inevitably become a part of the crypto market.

If your business is striving to keep abreast of the forthcoming regulatory changes, get in touch with Andy Hodson, our cryptocurrency and Financial Crime & Fraud recruitment expert.