Today is the deadline for cryptocurrency companies to be registered with the UK’s financial regulator or cease operations in the country – a move that has been largely criticised by the industry.
The requirement comes as part of the Financial Conduct Authority’s (FCA) attempt to tackle money laundering and other financial crimes in the cryptocurrency industry.
Cryptocurrency companies operating in Britain must demonstrate that they meet anti-money laundering (AML) standards to gain approval from the FCA.
Last Thursday, the FCA told CNBC that it has approved just 33 crypto companies’ applications, meaning many firms have faced a race against the clock to gain approval – or in some cases chosen to abandon the UK market.
A spokesperson from the FCA said: “We have been reviewing cryptoasset firms’ applications to ensure they meet the minimum standards we expect – that those who run these firms are fit and proper and that they have adequate systems to identify and prevent flows of money from crime.
“These are in place so our financial system is not open to abuse by those who want to move and hide money made from violence, drugs, corruption or the exploitation of others.”
The FCA crypto deadline has received a mixed reaction from those in the industry.
Some hail the FCA’s work as a necessary attempt to regulate a market often described as the ‘wild west’, and to ensure the safety of everyone involved.
Others, however, see it as a dangerous move that could halt the UK’s participation in an increasingly valuable market.
James Kaufmann, a lawyer at Howard Kennedy specialising in crypto regulation, told UKTN that the FCA deadline “reflects the disinclination toward crypto at an institutional level”.
He said that the regulator hasn’t “approached this like a normal AML certification” and has “essentially asked firms to do a full application”.
Kaufmann is concerned that it could make the UK “less appealing” for cryptocurrency companies to do business, with firms more likely to choose places without “frictional costs”.
He described what the FCA is doing to the crypto industry in the UK as “senseless to the reality that crypto is here to stay” and that it “potentially threatens the UK’s eminence as a financial centre”.
Crypto firms will ‘inevitably’ leave the UK
Chirag Patel, CEO of digital wallets at Paysafe – a company already registered under the FCA’s terms – described its registration as “a highly rigorous process”, but still believes “it’s the right approach in the interests of UK consumers”.
Patel said: “The decentralised finance space has exploded with new crypto companies and services – it’s an incredibly exciting time but it’s very important that consumers can easily recognise who the reputable players are. To achieve a place on the FCA’s register needs to be a testament to the strength of a company’s approach to regulation, risk, and compliance.”
Patel acknowledged that FCA requirement will “inevitably” see some crypto firms exit the UK market “because they are unable to meet the necessary standards in terms of risk and compliance”.
Alex Reddish, managing director at Tribe Payments, told UKTN that while he recognised “the FCA is pioneering a regulatory gold standard that will provide safe and secure access to crypto and digital currencies”, there is a clear issue with how the organisation is going about the approval process.
“There has been a public backlash about the slow pace of feedback and approvals, with many crypto firms left in limbo,” Reddish said.
Reddish added: “It seems that the FCA is damned if it does and damned if it doesn’t. The FCA has to act, but a rigorous and pioneering regulatory environment for crypto was never going to happen overnight.”