CUK and Members respond to FCA Public Consultation ‘Coronavirus and Safeguarding Customers’ Funds: Proposed Guidance for Payment Firms’ (Jun 20)
Regulatory Engagement & Advocacy
  • CryptoUK
  • 14 June, 2020

CryptoUK respond to FCA Public Consultation – “Coronavirus and Safeguarding Customers’ Funds: Proposed Guidance for Payment Firms

Coronavirus and safeguarding customers’ funds: proposed guidance for payment firms

We welcome and support the efforts of the FCA in ensuring added levels of protection for UK customers, especially during this period (Covid19) where certain members of the public may be more vulnerable to nefarious acts, such as scams for example.

The purpose of the cusulation is for payment firms to tighten up on their internal
controls in the following 3 areas.

1. Safeguarding
2. Prudential risk management
3. Wind down plans

About CryptoUK

Crypto UK (CUK) is the UK’s premier trade body for the cryptoasset industry. We believe in the transformative potential of digital and crypto assets and the underlying blockchain technology. We promote accountable self-governance whilst advocating for fit-for-purpose legislation and regulatory frameworks for crypto and digital assets in the United Kingdom. We achieve our vision by establishing and fostering productive partnerships between digital and crypto asset industry participants with legislatures, policymakers, and regulatory agencies to educate and nurture an environment that fosters innovation, job creation and investment.

Below are the collective responses from our members and chairperson to the 3 questions posed by the FCA.

1. ‘Do you agree with our proposed guidance on safeguarding? If not, please
explain why.’

In regards to “Reconciliation processes”. Can we clarify that the request to complete daily reconciliations refers to only fiat transactions? Or would crypto asset transactions be in scope?

In regards to “Acknowledgement from safeguarding institution”
Unfortunately the UK Banks still view crypto related businesses with suspicion. One of CUK’s position statements for 2020 is to advocate for a fair, balanced and transparent approach to banking crypto firms, here in the UK. Therefore, if such a relationship does exist our members may have an issue with the institution refusing to give a trust letter

In regards to “No other amounts to be mixed into safeguarding
accounts/ co-mingling”. This is an area that we heavily advise our members to put in place such safe-gaurning around co-mingling and such activities as re-hypothecation. We advocate to our member base against such practices that are non-transparent and or agreed beforehand with the client. In regards to “Periodic reviews of appointments of credit institutions, custodians and insurers” .Many of our members are trading exchanges. To clarify is the FCA asking for annual reviews for fiat custodias only? Or would they wish for cryptoasset custodian periodic review also?

Can the FCA please clarify what current methodology it is using to categorise a small payment institution?

2. ‘Do you agree with our proposed guidance on managing prudential risk? If
not, please explain why.’

In regards to “Capital adequacy”. Would the FCA define receivable as any
form of asset or property? Or only considering fiat in scope?

In regards to “Liquidity and capital stress testing”. I refer to the earlier
point in regards to the definition of a small payment firm. We feel that this
level of financial management is more suited to a highly regulated financial
institution (Basel 3), rather than a smaller payment firm.

Risk-management arrangements. CUK agrees that robust treasury
management is appropriate for all our member base.

3. ‘Do you agree with our proposed guidance on wind-down plans? If not,
please explain why.’

We have no specific comments and agree with the proposed guidance.