FCA expanding Money Laundering regs to Publication of open-source software & crypto to crypto services. (Subject to consultation)

TLDR: FCA implying open-source wallet providers & crypto-to-crypto services need to register under MLR (Money Laundering Regulations) requiring them to pay £5000, KYC customers, track transactions, and follow AML/CTF practices.

As an MLR compliant business you will have to comply with AML/CTF (Counter terrorist financing) and CDD (Customer Due Diligence). This is fairly normal for fiat exchanges and ICO's, but this document appears to broaden the category of businesses that need to comply to include Crypto-to-crypto exchanges (this would include things like btc->lightning on-boarding services) and software developers providing free software (e.g. key generators, electrum etc).

This is taken from the consultation document CP19/29

"Cryptoasset businesses carrying out the activities listed below should assume they must comply with the MLRs from 10 January 2020 and that this consultation applies to them."

Crypto-asset activity	As described in the Treasury consultation
Cryptoasset exchange provider	A business that provides the following services:• exchanging fiat currency (government-issued currency) for a cryptoasset (or vice versa) • exchanging 1 cryptoasset for another cryptoasset.
Cryptoasset Automated Teller Machine ( AT M )	Physical kiosks that allow users to exchange cryptoassets and fiat currencies
Custodian Wallet Providers	A business that looks after the customer’s tokens in its IT system or server and, may administer or transfer the token on behalf of the customer.
Peer to Peer Providers	A business that provides an online marketplace which facilitates the exchange of fiat currencies and cryptoassets (both fiat-to-crypto and crypto-to-crypto) between prospective buyers and sellers
Issuers of new cryptoassets, e.g. Initial Coin Offering (ICO) or Initial Exchange Offering (IEO)	A business that sells a cryptoasset, promoted or sold as a new type of cryptoasset or one that will become useable in the future, in exchange for fiat currency.
Publication of open-source software e.g. Non-Custodian Wallet providers	A business that provides software such as an application, that may be downloaded and used by a customer on their device to store or administer a token, e.g. a non-custodian wallet application that a customer can download onto a device to store the private key in relation to a token.

This list has been expanded from the original list provided in an earlier consultation Transposition of the Fifth Money Laundering Directive

The original list did not include Peer to Peer providers and Open source software. The summary for the consultation of the MLDirective has not yet been completed, making it a surprise to see the categories expanded without justification. There is a chance that this is a mistake, but as it currently reads it sweeps your crypto business into MLR's.

The current CP19/29 consultation is asking for feedback on the cost of MLR registration, but I think we need to provide feedback that the range of businesses caught up in this legislation is extreme.
If you are a UK crypto based business, coder, or generally interested person, you should fill out the feedback form

submitted by /u/Elum224
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