THE City watchdog has got tougher on crypto exchanges operating in the UK but some have managed to pass its registration process.
Here we take a look at the platforms that have made it onto the Financial Conduct Authority’s crypto register – and what this means for investors.
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Buying and selling cryptocurrencies such as Bitcoin and Ethereum isn’t regulated.
This is one of the reasons it is very risky as there is no protection if your money is lost or stolen.
Valuations can also be volatile and the FCA has warned that investors should be prepared to lose all their money.
One area where the FCA does have some power though is with anti-money laundering.
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Since January 10 2020, Any crypto exchange operating in the UK must register with the FCA under anti-money laundering rules.
This means an exchange must check who its investors are and verify their identities to ensure it is not supporting criminal activity or terrorism.
Crypto exchanges have until March 31 2022 to register.
More than 80 firms including established exchanges Coinfloor and eToro have temporary permissions.
These are firms that were previously doing AML checks but the FCA is still assessing their application for full permissions.
They may eventually be added to the full crypto register if they gain full permissions.
There are some platforms that haven’t even made it to the temporary list.
The FCA banned the world’s largest cryptocurrency exchange Binance from operating in the UK this week.
How to choose a crypto exchange
INVESTORS have plenty of choice when looking for a crypto exchange but this does create extra risks.
Crypto trading isn’t regulated and investors can buy and sell virtual currency such as Bitcoin wherever they want.
It is important to conduct due diligence on your chosen platform though as you need to ensure it is safe and your money is protected from hacks and scammers.
Find out where a platform is based, who is behind it and is it subject to any regulations.
Make sure you understand any costs or minimum investments when trading.
The FCA has tried to protect investors with its crypto register which shows firms that have introduced tough anti-money laundering checks.
This, and those with temporary permissions, may give some reassurance that an exchange is keeping an eye on who its customers are.
But this doesn’t give you any extra protections.
Cryptocurrencies are unregulated.
You can’t use the Financial Ombudsman Service to complain or the Financial Services Compensation Scheme if a platform goes bust.
There is also a risk that the FCA targets an unregulated platform you are using or one that isn’t on its register.
It banned the world’s largest crypto exchange Binance from the UK this week.
Binance said this wouldn’t affect those from the UK with money on its platform as its UK brand was a separate legal entity.
However, Brits have been having trouble withdrawing and depositing money into their Binance accounts, according to reports from the Financial Times.
Binance has said that its platform for adding or removing sterling had been “suspended for maintenance”, and Brits had been blocked from making such transactions.
The FCA isn’t the only one cracking down on cryptocurrency exchange platforms.
Banking giant Natwest Group has capped the daily amount that Brits can send to these sites, including Binance.
All these factors should be considered when choosing a crypto exchange.
London-based fintech investor Viktor Prokopenya said users should also check pricing and how easy it is to make withdrawals.
He told The Sun: “The two most prominent elements to research beyond simply the most secure exchange, is fee structure and withdrawal policies.
“Depending on the frequency and trading strategy with which the user intends to use the crptyo exchange, fees can often make or break profitability. Although becoming less common, hidden fees and charges can marginally eat away at overall portfolios.”
There are just five exchanges that have made it into the FCA’s dedicated crypto register.
This is different to the financial services register that lists firms such as banks and financial advisers.
The crypto register can be accessed and searched on the FCA website.
These are UK-based companies that have passed the City watchdog’s assessment of how they conduct anti-money laundering checks.
This doesn’t make cryptocurrencies any less risky as there is still no Financial Services Compensation Scheme (FSCS) protection if the exchanges collapse plus the value of cryptocurrencies can drop.
But it does mean the FCA has checked and approved how these six firms monitor their customers.
Here is what investors can do with the six firms that appear on the cryptoassets register.
Gemini
Investors can buy and sell Bitcoin and other cryptocurrencies through Gemini.
You can also earn up to 7.4% by lending your cryptos to institutional investors.
It is planning its own credit card that will pay 3% in crypto rewards on spending.
You can start an account online or through its smartphone app.
Trading fees depend on how much you are buying or selling.
It starts at 75p for orders up to £7.50, rising to £1.25 up to £20, £2 up to £50, £2.25 up to £150,000 and 1.49% beyond that.
Ziglu
Investors can buy and sell cryptocurrencies such as Bitcoin, Ethereum, Cardano and Litecoin from £1 on Ziglu.
You can also earn interest of 5% if you invest in its digital currency called TrueGBP.
This money is lent to institutional investors such as hedge funds, which helps pay your interest.
This is an investment product and there is a risk that a borrower defaults and you won’t get your money back.
Ziglu has its own smartphone app where you can manage your investments.
There are no account fees but there is a 1.25% charge for buying and selling cryptocurrencies.
5 risks of crypto investments
THE Financial Conduct Authority (FCA) has warned people about the risks of investing in cryptocurrencies.
- Consumer protection: Some investments advertising high returns based on cryptoassets may not be subject to regulation beyond anti-money laundering requirements.
- Price volatility: Significant price volatility in cryptoassets, combined with the inherent difficulties of valuing cryptoassets reliably, places consumers at a high risk of losses.
- Product complexity: The complexity of some products and services relating to cryptoassets can make it hard for consumers to understand the risks. There is no guarantee that cryptoassets can be converted back into cash. Converting a cryptoasset back to cash depends on demand and supply existing in the market.
- Charges and fees: Consumers should consider the impact of fees and charges on their investment which may be more than those for regulated investment products.
- Marketing materials: Firms may overstate the returns of products or understate the risks involved.
Fibermode
Fibermode has launcehd a mobile app that lets you make payments in real money and earn cashback in the form of Bitcoins.
The app is working on loyalty programmes with shops but you can currently earn 25% cashback in Bitcoin by purchasing Mode merchandise such as hats and t-shirts.
For example, a purchase of £80 would give you £20 worth of Bitcoin, which is 0.0010BTC.
The app, which is currently only available on Android smartphones, will also let you buy and sell Bitcoin for a 0.99% fee.
Digivault
Digivault isn’t a service aimed at standard investors.
It instead runs a custody service that looks after cryptocurrencies owned by institutional investors.
Archax
Similar to Digivault, Archax only works with institutional and high-net worth investors.
It is launching a crypto exchange and is developing tools to help wealthy investors digitise and make money from their assets.
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