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Former chancellor Lord Hammond made chairman of crypto company

Lord Hammond - David Rose for the Telegraph
Lord Hammond - David Rose for the Telegraph

Lord Hammond of Runnymede is to become chairman of cryptocurrency company Copper, which withdrew its bid to be registered in the UK six months ago.

The former chancellor joined the company as an adviser in 2021 just weeks after being cleared of breaching lobbying rules while assisting another financial technology company he advises, Oaknorth.

Copper applied to register with the Financial Conduct Authority (FCA), but withdrew its application and was forced to register in Switzerland last year. It had been given a temporary registration, pending the FCA approving the company's controls to prevent terrorist activity and money laundering.

As he announced his chairmanship, Lord Hammond criticised the UK's cautious approach to cryptocurrency regulation. He told the Financial Times: “Switzerland is further ahead. The EU is also moving faster. There has to be appetite to take some measured risk”.

Lord Hammond compared parts of the cryptocurrency industry to the 'wild west' but said, "the UK needs to be leading in this area post-Brexit".

Dmitry Tokarev, Copper's chief executive, said on Thursday morning: “It has been an outstanding privilege to benefit from Lord Hammond’s strategic expertise forged by his successful career in politics and business."

Lord Hammond quit Parliament in 2019 after being stripped of the Conservative whip by Boris Johnson following a backbench rebellion.

Copper is now regulated by Swiss authorities through a locally incorporated subsidiary.

In accounts filed with Companies House last year Copper said it had withdrawn its “application for registration with the FCA under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017.

Lord Hammond, who owns a “small” stake in Copper, said the company hoped to return its operations to Britain one day.

He said: “We are very much hoping to migrate back to London”.

“Post-Brexit, the UK needs a strong financial services sector. We need to work out how to become the location of choice for trading in new asset classes.”

Copper was founded in 2018 and said it had raised $196m in external funding last year. Among its backers are Jersey hedge fund Brevan Howard's billionaire co-founder, Alan Howard.

Other backers include venture capital firm Target Global, whose founder is the son of a sanctioned Russian billionaire. The founder, investor Alex Frolov, stepped down from the fund in December.

The FCA is widely regarded as sceptical towards cryptocurrency businesses, leading to some financial technology startups seeking registration in other countries.

The watchdog held out against granting pre-eminent cryptocurrency exchange Binance full authorisation to operate as a UK business, having repeatedly warned consumers that its British subsidiary is only authorised to carry out “a limited set of activities”.

The value of digital currencies fell over the final three months of last year after the collapse of FTC and the arrest of its founder Sam Bankman-Fried. The company collapsed amid allegations of fraud and claims that its executives misused customer funds.

Separately on Thursday, the Financial Conduct Authority (FCA) said that 85pc of cryptocurrency companies that had applied for official UK registration had failed to meet minimum standards for blocking money laundering and terror financing.

In a letter to MPs of the Treasury Committee, Sarah Pritchard, an executive director at the FCA, said: "We identified significant failures in relation to key controls such as customer due diligence".

Under the FCA's crypto asset regime, cryptocurrency companies are not regulated in the UK and consumers have little protection, but they are registered as being compliant with a minimum standard for preventing money laundering and terror financing.

While this did not imply criminal wrongdoing, it meant firms were inadequately prepared to detect fraud, terror funding or money laundering. The failings led a number of firms to withdraw their applications.

However, Ms Pritchard said in a "small number" of cases the FCA had identified suspected financial crime and "direct links to organised crime" by cryptocurrency companies. It said it had referred information to law enforcement agencies and investigations remained ongoing.