The UK Financial Conduct Authority (FCA) has published its proposals for fees and rates for 2022/23. The document reveals how the regulator plans to recover the costs of the cryptoasset scope change project.

This year, the FCA is completing a scope change project to bring certain cryptoasset businesses into supervision under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs).

The FCA remit is limited to registering and supervising them under the anti-money laundering and counter terrorist financing regime. The regulator says it is not responsible for regulating how they conduct their business with consumers.

FCA’s experience of processing applications since January 2020 has revealed that businesses in this sector are often extremely complex and present high risks. The regulator explains that it has invested considerable time and resources into scrutinising them and it has rejected about 80% of applicants.

The FCA says:

“We are still processing the last applications but expect the population of fee-payers to be about 50. This will not be enough to make a material contribution towards recovery of the scope change project costs”.

The regulator has set a minimum fee of £2,000 for cryptoasset businesses but says that it will need to charge a variable fee-rate of £4.03 per £1,000 of supervised income to recover their annual supervisory costs of £3.01m.

The cryptoasset scope change costs are £8m after deducting £1m that applicants contributed through application fees. To recover the full project cost from some 50 cryptoasset businesses on top of their supervisory costs would require a fee-rate of £15.01.Spreading the costs over a longer period, would not represent a prudent approach to managing the FCA’s cash flow.

Consequently, on this occasion the FCA proposes to spread recovery of the cryptoasset scope change costs across the wider population of fee-payers. Since the FCA supervises cryptoasset businesses under the MLRs, not FSMA, it has confined recovery to those fee-blocks where the majority of fee-payers are subject to the MLRs. The FCA is spreading the costs proportionately across all the relevant fee-blocks.

The regulator considered imposing a higher weighting on fee-block G.3 (the cryptoasset fee-block) but concluded that this would result in a disproportionately high fee-rate for a restricted supervisory regime under the MLRs which does not involve conduct regulation under FSMA.