UK cryptocurrency law: an overview

Cryptocurrency has had its fair share of controversy. But with new laws and regulations coming into play, will crypto become more accessible – and potentially even mainstream?

This guide by the team at Superteam UK and D2 Legal Technology has some brilliant legal insights by some of the world’s most informed cryptocurrency experts, providing practical advice on legal, regulatory, and compliance issues.

Here we focus on some of the many interesting insights.

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Tokenisation and business models: insights from CMS

Tokenisation is highlighted as a critical component for businesses engaging with both traditional finance (TradFi) and the evolving digital asset landscape. The guide emphasises the importance of understanding the current financial system and working within its framework. It underscores the necessity of obtaining legal opinions and ensuring regulatory compliance to support innovation and maintain the integrity of tokenised products.

Charles Kerrigan, a partner at CMS, delves into the intricacies of tokenisation, emphasising the importance of understanding the current financial system.

He states, "If your business model involves dealing with TradFi firms or products, you will need to understand how the current system operates and work within it."

Kerrigan underscores the necessity of legal opinions and regulatory compliance for businesses seeking to engage with traditional financial institutions. His insights highlight the evolving nature of tokenisation and the need for clear legal frameworks to support innovation.

Token warrants: guidance from Mishcon de Reya

Anne Rose and Callum Blundell, legal experts at Mishcon de Reya, provide valuable guidance on token warrants.

They explain, "A Token Warrant functions as a promise that gives the holder the right, but not the obligation, to purchase a set number of digital tokens at a later date, for a price that's decided upfront."

Their analysis emphasises the importance of clear terms and conditions in token warrants to avoid potential pitfalls. They advise companies to carefully define the "Portion" of tokens allocated to investors to prevent oversupply and maintain token value.

Risk mitigation and compliance: Keystone Law's perspective

Leon Hurd from Keystone Law offers a comprehensive overview of anti-money laundering (AML), sanctions, and compliance laws. He highlights the importance of robust AML controls, stating, "The MLRs were extended to certain types of cryptoasset businesses in January 2020, pursuant to which: (i) 'cryptoasset exchange providers'; and (ii) 'custodian wallet providers' are required to register with the FCA for supervision of their AML processes."

Hurd's insights underscore the critical role of compliance in mitigating financial crime risks and ensuring the integrity of crypto projects.

Token launch strategies: insights from Gunnercooke

James Burnie and Pavan Kaur from Gunnercooke provide strategic advice on token launches. They emphasise the importance of compliance with UK regulations, noting, "The act of selling a token from the United Kingdom (UK) triggers a requirement to register with the FCA under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017."

Their guidance highlights the need for a well-developed community to support the token and the importance of understanding the legal landscape to ensure a successful launch.

The "Founder's Guide to UK Crypto Law" offers invaluable insights from leading legal experts, providing a roadmap for navigating the complexities of crypto law in the UK.

The contributions from CMS, Mishcon de Reya, Keystone Law, and Gunnercooke and many others underscore the importance of legal clarity, compliance, and strategic planning in the rapidly evolving crypto landscape.

As the industry continues to grow, this guide serves as a vital resource for founders seeking to innovate and succeed in the digital economy.

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