Firms operating in Britain must be registered with the Financial Conduct Authority (FCA) by March 31.
In the event crypto companies fail to register with the financial watchdog by the deadline, they could be forced to close down their businesses. On Thursday, the FCA also released a new circular for regulated firms in the country having exposure to cryptoassets.
“We are reminding all regulated firms of their existing obligations when they are interacting with or exposed to cryptoassets and related services,” the release stated.
High withdrawal rate of applications
To date, the FCA has approved only 33 applications from companies who have registered, while 80% of the applications that were filed, have been withdrawn, as they were not meeting the required anti-money laundering (AML) standards, an FCA official told CNBC.
“We’ve seen a high number of the cryptoasset businesses applying for registration not meeting standards there to help ensure firms are not used to transfer and or disguise criminal funds,” the spokesperson said.
Continuing, the spokesperson said that “firms that do not meet the expected benchmark can withdraw their application. Firms that decide not to withdraw have the right to appeal our decision to refuse, including through the courts.”
But is the FCA dropping the ball?
While the watchdog has also reminded the companies with temporary registrations to comply with the regulations around money laundering, terrorist financing, and transfer of funds, many within the industry have expressed frustration with how the FCA has handled the crypto register.
“The process has been a total disaster from the FCA’s side of things,” one attorney who helps advise crypto companies on their applications, told CNBC. Due to the sensitivity of the matter, the attorney chose to remain anonymous in describing the slow approval process of applications, also sharing that the FCA has often been unresponsive.
In its focus around some of the more stringent requirements involved with risk assessment, customer communication, and custody considerations, the FCA noted that “at all times, firms remain responsible for identifying and managing potential risks related to cryptoassets.”
With the increasing rate of financial crimes, the FCA intends for all authorized businesses to maintain the appropriate systems necessary to counter possible exploitation and cybercrime.
For instance, Gemini, a crypto exchange that has received a green light from the FCA, believes the licensing regime is crucial for crypto businesses, providing customers with the assurance that they’re dealing with a firm whose already undergone rigorous scrutiny.
“Getting a crypto asset registration in place was a critical step for crypto in this country. It gave firms that really have that desire to seek regulatory approvals something to demonstrate as a key differentiator,” said Blair Halliday, Gemini’s head in the U.K.
But, UK’s strong crypto players like Revolut and Copper are reportedly still waiting for their badge of approval. And failure to acquire a license can force the companies to shift base from the UK.
Meanwhile, crypto offerings by companies like PayPal and Coinbase through offshore entities remain unaffected, CNBC pointed out.
BoE’s voice for global regulations grow strong
The U.K. central bank’s Financial Policy Committee released its minutes today, pushing for global modulation for stronger crypto oversight.
“Enhanced regulatory and law enforcement frameworks are needed, both domestically and at a global level,” the committee noted in previous meetings.
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BeInCrypto has reached out to company or individual involved in the story to get an official statement about the recent developments, but it has yet to hear back.