FCA Revises Fees Structure for Crypto Businesses Operating in the UK
The UK Financial Conduct Authority (FCA) recently made sweeping changes to the proposed fee structure for businesses operating in the crypto sector. In the new rules, the fees have been raised for some. From now, the FCA will use a two-tier system with fees being charged based on the income generated by a crypto firm. Initially, the FCA had opted for a fixed fee set at £5,000 for each crypto firm.
The New Structure
In the new structure, if a company makes £250,000 or less, it will be charged a £2,000 fee to register its business. All companies that make above £250,000 will have to pay a £10,000 fee. The FCA decided to rescind its earlier proposal after collecting feedback from members of the public. Most of the feedback it received indicated that the fee would be too high for small startups without a real income.
According to the FCA, one CEO of a company told them they spent less than £650 in their first year and only £5,100 in the second year. As a result, if they had been paying the £5,000 fee, they would have had to spend more time on regulation than on other issues such as information security, staff orientation, and much more. The CEO told them that such a company might have been forced to move abroad due to high fees.
Another respondent to the initial proposal said the fee would have represented about six months of profit from one ATM. The company said they had an annual turnover of £72,000 and they could comfortably pay the fee. However, they argued that it would be impossible for small businesses to pay.
They suggested that startups should not be change any fee, with some suggesting that small companies should not even be regulated. However, the FCA responded that parliament had charged the agency with regulating all businesses in the crypto sector. In its legislation, parliament had not set a limit on the businesses that should be regulated. As a result, the FCA could not arbitrarily choose not to regulate small businesses since there was no supporting legislation. It concluded that it was only fair for small businesses to contribute to the ongoing cost of supervising the industry.
80 Applicants Identified
In the first draft of the proposed fee structure released in October 2019, the FCA said that it had identified 80 potential applicants. It claimed that it had estimated the total cost of the entire registration process would be £400,000. As a result, it had set the fee at £5,000 for each business that wanted to be registered. Because of this new structure, small companies will be able to operate in the UK and the agency will make some of the money from large businesses. This is why they introduced the two-tier structure.
Some reports in December indicated that the FCA would be taking up a larger role in regulating the crypto sector. It will be at the head of an initiative that aims to stop terror financing and money laundering using crypto in the UK. This initiative is under the Economic Crime Plan 2019-22.
Connection to the EU's 5AMLD Rules
The EU's 5AMLD rules to stop money laundering and the financing of terror came into force on January 10. Ever since then, the FCA has been the regulatory supervisor for crypto companies in the country. As a result, the FCA insists that all businesses operating in the crypto sector must register with it by Jan. 10, 2021. To do this, all companies must make their submission for registration by June 2020.
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