The Financial Conduct Authority (FCA) in the UK has written to the CEOs of major banks to warn of the risks of cryptocurrencies. The letter, which comes from two Executive Directors of Supervision, reminds financial institutions of the importance of scrutiny.

Guarding Against Illegal Activity

While the letter, entitled Cryptoassets and Financial Crime, does acknowledge that not all holders of crypto assets are criminals, it also advises that the associated anonymity and ease of international movement that comes with crypto makes it a target for criminals. In light of this, it recommends that banks review their security processes, including evaluation of risks and staff training. It also directly mentions state-sponsored cryptocurrencies, which are a fairly new development in the world of digital finance:

“Where a firm identifies that a customer or client is using a state-sponsored cryptoasset which
is designed to evade international financial sanctions, we would see this as a high-risk
indicator.”

This would appear to be a direct mention of Venezuela’s highly controversial Petro. The letter also covers ICOs and methods of checking in order to ascertain where certain clients get most of their wealth.

“Following a risk-based approach does not mean banks should approach all clients operating in
these activities in the same way. Instead, we expect banks to recognise that the risk
associated with different business relationships in a single broad category can vary, and to
manage those risks appropriately.”

Certainly, the overall tone of the letter is not positive. And it may be a hint of things to come, as the UK government hold meetings on potential upcoming regulations for crypto and associated trading.