The odds seem stacked against cryptocurrency firms seeking access to the UK regulated market, if recently released data from the Financial Conduct Authority (FCA) is anything to go by.
Britain’s financial watchdog, the FCA, has determined more than 265 company applications for crypto assets as of January 2023, 74% of which were rejected or withdrawn entirely and 11% of which were rejected after consideration, which means that only one in six are approved.
At first glance, the FCA’s rejection rate appears to contradict Rishi Sunak’s promise to make Britain “a global hub for crypto asset investment and technology.”
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But the FCA strike rate may be more benign than it seems. Along with the data, the regulator published extensive guidelines for making a decent application, with advice on detailed business plans, risk assessment, the appointment of a money laundering reporting officer (MLRO), blockchain compliance, and other policy requirements. .
The lesson seems to be: get your house in order and maybe hire a compliance expert before you apply.
What is the crypto asset registrar?
The FCA’s crypto asset registrar was established in 2020 to bring previously unsupervised platforms under amended money laundering, terrorist financing and funds transfer rules.
Any company that facilitates the transfer of tokens or provides escrow services must register with the FCA.
Successful registrants include CoinJar, Revolut, eToro, Fidelity Digital Assets, Galaxy Digital (TSX-V:GLXY), Gemini Payments, owned by the Winklevoss twins, and Copper, chaired by former UK Chancellor Phillip Hammond.
Established cryptocurrency exchanges such as Coinbase can register as a licensed electronic money institution.
Unregistered crypto asset companies operating in the UK are subject to criminal repercussions.
Despite Britain’s regulatory strides in the cryptocurrency sector, some significant blind spots remain in terms of customer protection.
As of today, cryptocurrency companies are not covered by the Financial Services Compensation Plan, which provides deposit insurance for clients of licensed financial services companies.
Due to the lack of legal protection, participating in cryptocurrency platforms remains a high-risk affair.
