The Financial Conduct Authority (FCA) will require businesses involved in non-fungible tokens (NFTs) to register with them, according to a consultation on money laundering by the UK Treasury. This move comes as part of the government’s broader efforts to refine cryptocurrency regulations, expanding beyond crypto exchanges and custody providers to include NFT issuers under the oversight of the FCA for anti-money laundering (AML) and counter-terrorist financing (CTF) purposes.
NFTs are unique digital tokens that typically represent ownership of assets like art on the blockchain. While they are expected to remain outside the scope of regulated financial services, they will still be subject to AML and CTF regulations, as outlined in the consultation document. This decision is consistent with the UK’s approach of tightening regulations in the crypto market, which previously required firms to register with the FCA in order to operate within the country.
Last year’s passage of the Financial Services and Markets Act marked the beginning of treating crypto activities as regulated financial services. However, NFTs are not classified as financial services requiring regulation unless they are used in regulated activities. This nuanced approach means that while direct financial services involving NFTs may not be regulated, issuers must still comply with AML and CTF regulations overseen by the FCA.
The consultation document from the Treasury also suggests that the regulatory scope may expand further as the crypto industry evolves, potentially leading to more firms needing to register with the FCA in the future. The government is seeking feedback on the proposed regulatory framework until June 9, indicating a willingness to engage in an open dialogue with industry participants regarding the future of crypto regulation in the UK.
