Bitpanda misleading claims slapped down by UK regulator

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On February 22, Austrian digital currency trading platform Bitpanda announced that it had purchased Trustology, a custodian wallet provider regulated by the U.K.’s Financial Conduct Authority (FCA).

In its announcement, Bitpanda claimed that it could now perform regulated custodian services in the U.K. The FCA, the U.K. watchdog that regulates Trustology, quickly put that notion to rest with an announcement of its own.

Welcome to Team Bitpanda, @TrustologyIO!
With this acquisition, we’re safeguarding our Bitpanda and Bitpanda Pro users’ assets with an insured, user-friendly custodial wallet platform with institutional-grade security.

Ready to find out more?👇https://t.co/rIWuOcvx3Y

— Bitpanda (@Bitpanda_global) February 22, 2022

“We are aware of recent statements made by Bitpanda announcing the acquisition of Trustology Limited,” the regulator said before stating that it had not yet assessed the “fitness and propriety” of the new beneficial owners.

It was an embarrassing moment for Bitpanda, which either did not understand how the U.K. Money Laundering Regulations work before making the announcement or deliberately made a misleading statement. Neither is a good look for a leading digital asset trading platform.

UK money laundering regulations & the FCAs powers

To its credit, the U.K. has some of the strictest money laundering regulations in the world. Its massive financial services sector requires them, and Trustology was registered under the Money Laundering Regulations (MLRs) back in 2019.

However, with the acquisition, Bitpanda became the new ‘beneficial owner’ of Trustology. The FCA pointed out that this changes things and that Trustology’s previous registration does not necessarily hold under Bitpanda’s ownership.

The regulator also pointed out that should it see fit, it can take steps to suspend or cancel the registration of a digital currency business if it isn’t satisfied that the new beneficial owner is fit and proper. It can also do this on a number of other grounds, such as when the beneficial owner has not complied with its obligations under the Money Laundering Regulations.

To be fair to Bitpanda, it isn’t mired in a scandal the way some other trading platforms such as Binance are, so this could well be a formality, and it may pass the FCA smell test with flying colors. Indeed, Bitpanda told The Block that it was confident no issues would arise.

Compliance is an ongoing issue in the digital asset industry

Whether it’s ‘open-source’ developers who aren’t aware of their duties to users and their potential liability when things go wrong, exchanges who don’t properly vet traders or who stand accused of trading against their own customers, or platforms like Bitpanda who make misleading statements in public without getting their facts straight, the digital asset industry has a long way to go before it reaches ‘legit’ status.

The breaches of laws and regulations are constant, and a combination of ignorance and malfeasance permeates the space (see our series, the Crypto Crime Cartel) even among its alleged leaders. However, as we’ve been reporting for the last couple of years, things are changing. Regulators are catching up, new laws are being drafted and passed worldwide, and old laws are being enforced by regulators who were blindsided by the sheer speed of the industry’s growth in recent years.

Times are changing, and while Bitpanda may get away with an embarrassing announcement that it failed to understand the legal situation surrounding its most recent acquisition, others won’t fare so well with regards to the misleading statements they have made to regulators, users, and others both in and outside the industry.

Watch: CoinGeek New York presentation, FYI: Better Information Tools for a More Lawful Blockchain Industry