The UK Financial Conduct Authority (FCA) has ordered all operators of cryptoasset ATMs (CATMs) to stop operating immediately. It has acted because none of the cryptoasset firms registered in the UK is licenced to offer crypto ATM services. Those that fail to comply are likely to be hit with enforcement action.
CATMs allow people to use banknotes to buy cryptoassets such as Bitcoin or to sell assets and receive cash. It believes that the anonymity associated with cryptoassets makes it impossible for those operating CATMs to know the customer. As such, they cannot comply with UK Money Laundering Regulation (MLR).
It also points to the case against Gidiplus, who offer CATM services. Gidiplus allows people to buy Bitcoin through their machines by depositing cash. The Upper Tribunal, Tax and Chancery Chamber heard the case against Gidiplus. In its 16 page judgement, it concluded that Gidiplus did not have the necessary mechanisms to adequately prevent misuse of the system.
Crypto firms disappearing without a trace
The FCA publishes a list of unregistered crypto firms in the UK. It regular audits that list, which contains companies added as recently as Mar 2022. The current list contains 244 names, although the FCA says 110 have already ceased trading.
The problem that customers of those firms have is that they are unregulated. As such, should they cease trading, there is no legal protection in terms of assets that any hold. It says: “people should be prepared to lose all their money if they choose to invest in them”.
Enterprise Times: What does this mean?
The action by the FCA is unsurprising. It has a statutory duty to ensure firms meet the UK MLRs. Given the unregulated and untraceable way CATMs operate, they are an easy way to launder money. The ruling against Gidiplus explains how easy it is for such behaviour to occur.
Many UK banks make it difficult, if not impossible, for people to buy and deposit the sale of cryptoassets in the UK. This is because, in their view, they cannot meet MLR and other requirements imposed by the FCA.
In addition, should you manage to sell any cryptoassets, HMRC will want tax paid on the sale. CATMs allowing people to realise cash for cryptoassets would have to show how they report to HMRC. As such, it is another blocker to the operation of CATMs in the UK.