Tribunal backs FCA on crypto-refusal decision

The Upper Tribunal has published its decision made in September on an application by Moneybrain Limited. Moneybrain had created a type of cryptocurrency called BiPS tokens and had applied to FCA to be registered as a cryptoasset exchange provider under the MLRs. FCA had issued a decision notice refusing the application because it considered Moneybrain had published misleading marketing and promotional material on its website deliberately and recklessly. As a result, FCA said it was not a fit and proper person. For these reasons, it said its decision should have immediate effect, which meant the firm’s temporary registration ceased and it could not carry on its relevant business. Moneybrain appealed against the decision and asked that its effect be suspended pending determination of the appeal.

The Tribunal noted that, in these sorts of applications, it does not consider the full merits of the case, but merely needs to be satisfied that there is a case to answer, and then needs to consider whether the proposed suspension would prejudice the interests of persons intended to be protected by the notice. The Tribunal found that there was a case to answer, rejecting the firm’s contention that FCA could not refuse the application on the basis of promotions which it contended were not within its remit, but anyway in relation to which the FCA financial promotions team had closed its investigation. It then looked to see whether there was a case for the firm to answer in respect of the actual material. Again, it found there was a case to answer and that, if the firm did act deliberately and/or recklessly in the words it used on its website, it would lack probity.

Finally, the Tribunal looks at whether allowing the suspension application would prejudice the interests of those the notice was intended to protect. The firm had moved out of the UK and said that if the suspension were granted it would repatriate.  FCA said that allowing it to resume operations in the UK would prejudice the interests of consumers because there was still a risk they may be misled by the website material.  Again, the Tribunal backed FCA – saying it had not identified any factor in the firm’s favour which would come “anywhere close” to outweighing the risk of consumer harm.

The suspension application was dismissed, and the Tribunal will now need to hear the full application against the refusal to register.  The firm also made applications for privacy and for recusal of the judge, both of which were refused.