The United Kingdom has had a considerable respect for digital currencies. But the Financial Conduct authority, U.K’s financial regulator has reached out to banks. Through a letter dated today 11th June 2018, The FCA officially warns banks on the risks of cryptocurrency-related accounts. In the letter which was addressed directly to the CEO’s of financial institutions, the FCA stressed that customers associated with virtual currencies should be thoroughly scrutinized.
The Financial Conduct Authority anticipates that these measures should help the financial institutions to reduce financial crimes involving digital currencies.
According to FCA,
“There are many noncriminal motives for using cryptoassets. These include using them as high-risk speculative investments or as a means of funding innovative technological development. However, this class of product can also be abused because it offers potential anonymity and the ability to move money between countries. You [banks] should take reasonable and proportionate measures to lessen the risk of your firm facilitating financial crimes which are enabled by cryptoassets”
Since the level of risks posed by cryptocurrencies varies, the Financial Conduct Authority advised the financial institutions to approach the risks on a case by case basis.
The letter noted that a high-risk customer or client can be identified if the customer or client is involved with “state-sponsored cryptoassets which are designed to evade international financial sanctions”
On how financial institutions should treat retail cryptocurrency investors, the letter stated that the,
“Firms should assess the risks posed by a customer whose wealth or funds derive from the sale of cryptoassets, or other cryptoasset-related activities, using the same criteria that would be applied to other sources of wealth or funds.”
The FCA also indicated that a bank should be cautious if a retail client or customer spends a considerable large amount of money on Initial Coin Offerings or token sales.
As the FCA officially warns banks on the risks of cryptocurrency-related accounts, cryptocurrency exchanges in the U.K have been calling for clear regulations to help boost confidence in the cryptocurrency market.