Overview
Cryptoassets continue to attract increasing regulatory attention as their use expands across financial services, payments and decentralised finance (“DeFi”). While these technologies present opportunities for innovation, regulators remain concerned about potential financial crime risks, including money laundering, terrorist financing and sanctions evasion.
The Financial Action Task Force (“FATF”) has highlighted risks associated with stablecoins, unhosted wallets and peer-to-peer transactions within the digital asset ecosystem. At the same time, UK regulators are moving towards a more comprehensive regulatory framework for cryptoassets.
As digital asset markets evolve, firms operating in the sector must ensure that their governance, compliance and financial crime controls remain aligned with both international standards and emerging UK regulatory requirements.
FATF Findings on Stablecoins and Digital Asset Risks
Stablecoins are cryptoassets designed to maintain a stable value by referencing fiat currency or other assets which have become widely used across the crypto ecosystem. They are commonly used for trading, payments and settlement within decentralised platforms.
The FATF has identified, in its latest Report, several areas of concern regarding stablecoins and related technologies, particularly where transactions may occur outside regulated intermediaries.
Areas of concern include:
- Increasing use of stablecoins across trading platforms, payments and DeFi services;
- Use of unhosted wallets, allowing individuals to store and transfer cryptoassets independently of regulated firms;
- Peer-to-peer transactions, which may occur outside regulated exchanges or service providers;
- Potential links between digital assets and illicit activity, including sanctions evasion and organised crime; and
- Transparency benefits of blockchain technology, which can allow transactions to be traced when appropriate monitoring tools are used.
While these risks exist, FATF emphasises that existing anti-money laundering, counter-terrorist financing and counter proliferation financing (“AML/CTF/CPF”) standards continue to apply to digital asset activity.
The UK’s New Cryptoasset Regulatory Regime
The UK Government is introducing legislation that will bring a wide range of cryptoasset activities into the financial services regulatory perimeter, expected to come into force on 25th October 2027.
Under the new regime, firms carrying out certain cryptoasset services in or to the UK will be required to obtain authorisation from the FCA and comply with regulatory standards similar to those applied to other financial services firm
The proposed framework will cover activities such as:
- operating cryptoasset trading platforms;
- dealing in cryptoassets as principal or agent;
- arranging cryptoasset transactions;
- custody and safeguarding of cryptoassets; and
- issuance and other activities related to qualifying cryptoassets.
The FCA intends to open the authorisation application window for cryptoasset firms between 30 September 2026 and 28 February 2027, ahead of the regime coming fully into force. Importantly, firms currently registered with the FCA under the Money Laundering Regulations (“MLRs”) will not automatically transition into the new regime and will need to obtain authorisation under the Financial Services and Markets Act (“FSMA”) if they wish to continue operating.
FCA Expectations for Cryptoasset Firms
Once within the regulatory perimeter, cryptoasset firms will be required to meet the FCA’s minimum regulatory standards for authorised firms. These include:
- complying with the FCA’s Principles for Businesses;
- meeting threshold conditions for authorisation;
- ensuring senior managers are fit and proper;
- implementing appropriate governance and risk management frameworks; and
- meeting regulatory expectations under the Senior Managers and Certification Regime (SM&CR).
The FCA is also consulting on how wider regulatory requirements, including elements of the FCA Handbook and consumer protection rules, should apply to cryptoasset firms.
Risks and Considerations for Firms
Firms operating in the digital asset ecosystem face several regulatory and operational challenges as oversight of the sector expands.
Financial crime risks – Cryptoassets may be used to facilitate illicit activity if appropriate controls are not in place. Risks may arise where transactions occur outside regulated intermediaries or where customer identities are difficult to verify.
Decentralised platforms and unhosted wallets – Transactions involving decentralised exchanges or unhosted wallets may reduce visibility for firms and regulators, making monitoring and due diligence more complex.
Cross-border activity – Cryptoasset transactions frequently occur across multiple jurisdictions, creating regulatory complexity and increasing the importance of international regulatory cooperation.
Rapid technological development – Innovation in areas such as decentralised finance, tokenisation and automated trading systems continues to evolve quickly, requiring firms to adapt compliance frameworks and risk management practices.
How Complyport can help
As the UK moves towards a comprehensive regulatory framework for cryptoassets, firms operating in the digital asset sector will need to prepare for increased regulatory oversight and more formal authorisation requirements.
Complyport can support firms in a number of areas, including:
- Regulatory authorisation and licensing;
- AML, transaction monitoring and financial crime controls;
- Compliance and governance;
- Risk management and regulatory readiness;
- MiCA compliance and regulatory reporting; and
- Management, administration, transmission, transfer, retention, custodianship and safekeeping of crypto-assets or cryptographic keys.
By combining regulatory expertise with practical industry experience, Complyport helps firms navigate complex regulatory requirements and prepare for the UK’s evolving cryptoasset regulatory landscape.
Book a Meeting with a Complyport SME
To ensure your organisation is prepared for the UK’s emerging FCA cryptoasset regulatory regime and can effectively address the financial crime risks highlighted by FATF, book a consultation with a Complyport Subject Matter Expert today.
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