Decoding Digital Assets: fscom’s Learning Series
Welcome to fscom’s Decoding Digital Assets series, a learning journey led by Heather O’Gorman, Head of Digital Assets. Designed to help businesses navigate the evolving cryptoasset landscape, this series begins by defining essential terms like CASPs, VASPs, MSBs, CEPs, and CATPs. Each chapter will break down key concepts, providing the knowledge and tools needed to stay ahead in this dynamic industry.
CASPs, VASPs, MSBs, CEPs, and now CATP? What do these acronyms mean?
The cryptoasset industry is rapidly evolving, and regulators worldwide are scrambling to keep pace. Among the regulatory changes, a new wave of terminology has emerged – CASP, VASP, MSB, CEP, and now CATP. While these acronyms may sound like jargon, they define crucial concepts in the regulatory frameworks governing cryptoassets.
Understanding these terms and their regulatory significance can help businesses stay compliant and prepare for new requirements as they come into effect depending on the jurisdiction services are offered to. But how do these terms differ, and where are they used?
Let’s break down these definitions, explore the jurisdictions that use them, and understand how they affect crypto-related businesses.
Unpacking the acronyms – what are CASPs, VASPs, MSBs, CEPs, and CATPs?
These terms refer to various business activities related to the exchange, custody, or trading of cryptoassets. While some of these terms are used interchangeably, others have specific meanings in different jurisdictions. Here’s what each term means:
- CASPs (Cryptoasset Service Providers)
In the UK, the term CASP is not officially used in regulations but it has gained prominence through the EU’s Markets in Crypto-Assets (MiCA) regulation. MiCA’s framework covers activities like providing exchanges for crypto-to-fiat or crypto-to-crypto transactions, custody, and asset management of cryptoassets. While not directly applicable in the UK post-Brexit, the concept informs the broader European standards, which UK businesses should monitor for cross-border operations.
- VASPs (Virtual Asset Service Providers)
VASP is primarily a FATF (Financial Action Task Force) term, describing entities that provide services involving virtual assets. While the UK adheres to FATF standards, it more commonly uses sector-specific terminology under the Money Laundering Regulations (MLRs). For example, UK crypto exchanges and wallet providers fall under the FCA’s remit and are assessed for their AML compliance obligations.
- MSBs (Money Services Businesses)
A MSB is any business that provides financial services, including the transmission or exchange of virtual currencies. MSBs are more frequently associated with the U.S. frameworks and are involved in services like crypto exchanges, remittance services, and virtual asset custodianship, subject to AML and KYC regulations under the Bank Secrecy Act (BSA).
- CEPs (Cryptoasset Exchange Providers)
Cryptoasset Exchange Providers are platforms that facilitate the exchange of cryptocurrencies for fiat or between digital assets. Businesses classified as such in the UK are those that allow customers to exchange cryptoassets for fiat money or other cryptoassets. These firms are subject to the FCA’s AML rules and financial promotion standards.
- CATPs (Cryptoasset Trading Platforms)
A CATP is a platform where users can buy, sell, or trade cryptoassets, such as a cryptoexchange or marketplace. The UK FCA recently introduced the term CATP in its Discussion Paper DP24/4 (2024), outlining new potential regulations for trading platforms. This term signals the FCA’s intent to refine the regulatory framework further, seeking to cover market abuse, admissions and disclosure standards for cryptoasset trading.
Global Context: Why Do These Definitions Matter?
For cryptoasset businesses, understanding the regulatory definitions and the specific obligations they bring is crucial. Here’s why:
- Staying compliant: Regulations vary by jurisdiction, and failure to comply with local rules can result in fines, restrictions, or even criminal changes.
- Adapting to new regulations: As new definitions and frameworks emerge, like the UK’s use of CATP, staying informed helps businesses anticipate changes and adjust their operations proactively..
- Building trust: Operating within the regulatory framework fosters trust with customers, investors, and partners, which is vital for long-term business success, positioning your business as a credible player in the market.
Global Context: Why the UK’s Approach Matters
While the EU’s MiCA and the U.S. FinCEN rules influence global standards, the UK’s approach is distinct. The FCA focuses heavily on AML compliance and financial stability, and its evolving use of terms like CATP reflects a nuanced understanding of the crypto landscape.
By staying ahead of these developments, businesses can ensure they meet both UK and international expectations, safeguarding their operations and reputation.
Conclusion
In the dynamic world of cryptoassets, regulatory definitions like CASP, VASP, MSB, CEP, and CATP are more than just acronyms – they represent the framework within which businesses must operate. For those in the UK, understanding these terms through the lens of the FCA regulations is vital for compliance and success.
As the UK regulatory landscape continues to evolve, businesses must remain vigilant and adaptable. By aligning with local definitions and proactively preparing for new standards, firms can navigate the complexities of crypto regulation and position themselves for sustained growth.
This post contains a general summary of advice and is not a complete or definitive statement of the law. Specific advice should be obtained where appropriate.
