The UK financial watchdog received 300 applications for crypto firm registration but approved only 41.
Despite plans to transform the region into a bustling crypto hub, the UK’s financial watchdog says it has approved only 41 of 300 crypto firm applications seeking regulatory approval to date.
On January 10, 2020, the Financial Conduct Authority (FCA) of the United Kingdom (UK) implemented new cryptocurrency-focused regulations to supervise businesses operating in the sector and ensure that they are subject to the same anti-money laundering (AML) and counter-terrorism financing (CTF) regulations as firms in traditional financial markets.
According to the FCA, only 15% of the 265 applications that were “determined” were approved and registered, 74% of firms either refused or withdrew their application, and 11% were rejected. Another 35 applications are still pending.
While the FCA did not expressly state why applications were rejected or withdrawn, it did provide feedback on “good and poor quality” applications.
According to the report, the more comprehensive applications included a detailed description of the firm’s business model, the roles and responsibilities of business partners and service providers, sources of liquidity, flow-of-funds charts, and an outline of the risk management policies and systems in place.
Incomplete applications were more noticeable where businesses used the application to promote their products and services, especially when the application process was still in progress:
“Applicants’ websites and marketing material must not include language that gives the impression that making an application for registration is a form of endorsement or recommendation by the FCA.”
According to the report, some companies’ applications may have been scrapped if they couldn’t demonstrate that they had sufficient blockchain-compliance resources in place to monitor on-chain transactions.
The FCA also stepped up its anti-money laundering efforts, requiring all firms to appoint a money laundering reporting officer who is “fully involved” in the application process.
The FCA also emphasised that just because a firm’s registration was approved doesn’t mean it’s no longer subject to obligations:
“Applicants must recognize that being registered is not a one-off formality or a tick-box exercise without any further obligations or interaction with the FCA.”
“This feedback should assist applicants in preparing their registration application and help make the process as simple and efficient as possible,” the note concluded.
Crypto.com, Revolut, CEX.IO, eToro, Wintermute Trading, DRW Global Markets, Copper, Globalblock, Moneybrain, and Zodia Markets are among the digital asset firms that have registered with the FCA thus far.
Given that many companies provide international services, the FCA in the United Kingdom has also confirmed that they are now collaborating with other state agencies around the world, most notably the US securities regulator and the US commodities regulator, to strengthen regulation where necessary.
The FCA has repeatedly stated that failing to register before conducting business may result in criminal charges.