Lawrence Damilola
The Financial Conduct Authority (FCA), the UK’s financial regulator, has revealed that 87% of cryptocurrency firms that applied for registration under the country’s money laundering rules did not receive approval in the past fiscal year.
In its annual report, the FCA stated that only four firms out of 35 applications submitted in the 12 months ending March 31 managed to secure registration. Three of the approved entities were named, such as BNXA, a payments partner of Binance, a PayPal UK unit, and Komainu, a crypto custody joint venture by Nomura. The fourth entity is yet to be announced. The remaining applications were either refused or withdrawn due to missing key requirements or failing to meet the standards needed for assessment.
“Over 87% of crypto registrations were rejected, withdrawn or refused,” adding that they assist firms applying for authorization by “communicating our expectations and issuing guidance on good and poor practice,” stated the FCA.
Since the regulator started overseeing the crypto sector in 2020, it has registered only 44 firms under its anti-money laundering rules from 359 applications received. The regulator awaits legislation allowing it to authorize crypto companies to operate fully in the country. However, after the election of a new Labour government in July 2024, plans related to cryptocurrency regulation have been paused.
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The lengthy registration process and lack of feedback have been points of contention among crypto companies, some of which have criticized the FCA for the time taken to process applications and what they perceive as unfair treatment.
“We have rejected submissions that didn’t include key components necessary for us to carry out an assessment, or the poor quality of key components meant the submission was invalid,” the FCA report noted. The regulator also reported that of the 35 applications in the last year, 15 were withdrawn, and nine were rejected.
International law firm Reed Smith pointed out that crypto firms might consider moving operations outside the UK due to prolonged processing times and the perceived lack of support from the FCA. The firm highlighted that “over the last three years, the FCA has taken an average of 459 days to process a crypto firm’s registration,” with 186 applications being withdrawn in that time frame.
“If it’s the case that applications are falling because crypto firms have essentially given up waiting and started looking abroad, this should send a clear warning about London’s competitiveness,” Reed Smith’s partner Brett Hillis remarked.
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The FCA has implemented stricter measures in recent years to ensure that crypto firms comply with anti-money laundering standards. According to the FCA’s report, most firms that failed to secure registration had “weak money laundering controls.” The regulator further stated that it had introduced a new “financial promotion perimeter” in June 2023 to ensure that crypto advertising in the UK is “clear, fair and not misleading.”
In addition to tightening regulations, the FCA noted that the general public in the UK has become more vigilant about potential crypto scams. The report mentioned that 63% of consumers who contacted the FCA regarding a scam did so before investing in a project — a 5% increase from 2023.
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LAWRENCE
Lawrence is a cryptocurrency journalist covering blockchain developments and digital assets.
