Most crypto companies that tried to register with the U.K.’s financial regulator have had to shut down or move their business out of the country. Many of the people who left are still helping people in the country from where they live now.
New rules could stop this from happening because they would require all crypto companies, whether they are based in the U.K. or not, to be registered and set up in the U.K. customers. But until these rules go into effect and set clear standards, the country’s financial regulator and the crypto companies that want its approval will be stuck in a tug of war.
Since January 2020, cryptocurrency exchanges and storage services in the U.K. have had to sign up with the Financial Conduct Authority (FCA) and follow its rules against money laundering in order to serve clients in the UK. This year, the regulator said that it had received 300 applications from potential crypto firms, but so far, only 41 had been approved.
The idea was to stop unregistered businesses from serving customers in the U.K., but some businesses that moved abroad are still doing business there. customers. This suggests that crypto companies would rather work in a less strict regulatory environment than meet the strict disclosure and reporting requirements of the Financial Conduct Authority. Even though the FCA has stated goals, they can still do it.
But some of the companies that didn’t get full approval from the FCA say that the registration process was hard because of long wait times, a lack of feedback, and what some said was unfair treatment by the regulator.
Lisa Cameron, chair of a cross-party parliamentary group for crypto in the U.K., told CoinDesk in a January interview that some companies had told her that they had given up on the process and gone elsewhere. “These are big businesses that want to do the right thing and work together in a positive way.”
About the FCA’s crypto registration regime, CoinDesk talked to 17 crypto companies, lawyers, consultants, and lobbyists. Representatives from the exchanges Exmo, GlobalBlock, CEX, and Bittylicious told CoinDesk that their companies had decided to serve the U.K. clients from somewhere else because they didn’t sign up with the FCA.
The FCA says it is not at fault. In an interview with Barron’s Live on January 19, FCA Director of Payments and Digital Assets Matthew Long said that many companies that did not pass the registration process did not show enough proof that they had strong systems in place to stop money laundering and terrorist financing.
In a December email to CoinDesk, the FCA said, “We work with crypto firms throughout the process to make sure they understand what we want and give them feedback on their application.” “Thirty-nine crypto companies have already registered, which shows that these standards can be met.”
The FCA said in late January that of the 300 applications it received, 195 were either denied (after a full review) or withdrawn, and 29 were turned down before they were even reviewed. In a few cases, the FCA reported applicants to law enforcement because they thought they were up to no good.
Louise Abbott, a partner at Keystone Law, said that at least five crypto companies that tried to register with the FCA but failed had scammed some of her clients.
“The FCA rejects a lot of applications for authorization, but as their letter says, that’s because a lot of entities can’t comply with the regulatory regime,” Abbott told CoinDesk in an email. “This doesn’t mean there’s criminal activity, but the risk is much higher.”
The FCA posted tips and advice on its website on January 26 about what companies need to do to get the regulator’s approval. Firms must have a detailed business plan that focuses on compliance oversight and reducing risk, as well as policies, systems, and controls in place to manage and reduce risk in the right way.
It could get worse for crypto companies because the government’s proposed rules, which are up for public comment until April, would require companies that successfully registered with the FCA to apply for new authorization and go through more thorough checks.
08 Mar 2023
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