UK crypto firms are growing increasingly weary of dealing with the country’s Financial Conduct Authority (FCA) and its complex rules. That’s according to a survey out today from SmartSearch, seen by BeInCrypto.
The research, conducted by Censuswide between May 26 and July 2, 2023, involved 500 industry compliance decision-makers. Over a quarter of the respondents question the FCA’s involvement in crypto products. Three-quarters have faced challenges with their FCA registration, and 37% have felt the need for additional guidance during the process.
The FCA Has Cracked Down on UK Crypto ATMs
Interestingly, over-the-counter (OTC) traders showed more openness to the FCA’s involvement compared to crypto exchanges. Is the FCA painting with too broad a brush? Trying to ram square pegs into round holes?
The FCA is the regulator of financial services and markets in the UK. Currently, businesses operating as exchanges, crypto ATM firms, and custodial service providers for crypto-assets are all required to register if they intend to operate in the UK. Not unlike regimes in many other countries.
However, the FCA and has a mixed history and reputation in the crypto industry, choosing to act ruthlessly some areas. For example, the regulator has taken a hardline stance on crypto ATMs in the country, authorizing raids on numerous businesses hosting the machines.
As of this writing, only six crypto ATMs are active in the country, with authorities linking them to money laundering operations.
Learn more about the pros and cons of regulating digital assets: Crypto Regulation: What Are the Benefits and Drawbacks?
On January 26, the FCA revealed 85% of crypto-asset firms failed to meet its standards for anti-money laundering and counter-terrorist financing. This fact prompted Harriett Baldwin, MP and Chair of the Treasury Committee, to refer to parts of the industry as a “Wild West.”
Multiple sources told BeInCrypto that their dealings with the FCA had been reasonable. Although, many also expressed concern about the compliance burden on smaller firms.
Andrew Boyd, co-founder and managing director at Finty, told BeInCrypto that the FCA’s regulation of crypto had been “marked by a careful, methodical approach.” However, the authority’s rigorous and stringent approach could be a “challenge for smaller companies.”
The UK Wants to Be a Digital Assets Hub
On Yavin, Co-Founder and CBO at Syndika, told BeInCrypto that the FCA was “horrible” for crypto companies. “Not as much as the SEC, but horrible for sure,” he said.
In Yavin’s view, the FCA does not understand crypto. And its expertise falls especially short with respect to decentralized finance (DeFi).
“The FCA is not really helping crypto companies as they should help. The regulatory process for crypto companies is not clear and way too complicated. The FCA is not handling crypto scams as it should. I know this from my personal experience and a few other people I know who reported scams to the FCA but they completely ignored all scam alerts,” he continued.
On also made comparisons to regulators in Germany, Japan, Singapore, and Hong Kong who are “doing so so much more.”
Rishi Sunak, the current prime minister, has sought to position the UK as a “crypto hub.” On June 5, MPs sympathetic to the crypto industry called for the government to appoint a “Crypto Tsar” to help achieve that goal.
However, Andrew Griffith, economic secretary to the UK Treasury, told MPs on June 13 that it had no plans to do so.
The FCA pursues its campaign on many fronts. Recently, the FCA has ramped up its crackdown on crypto advertising and social media “finfluencers.”
The agency has warned crypto firms marketing to UK customers to comply fully with its guidelines by October 8, 2023. On July 17, the FCA also warned that certain social media communications—including memes—may break its guidelines.
An FCA spokesperson told BeInCrypto: “We only register firms that demonstrate they can meet the standards. We expect firms to be fit and proper and have adequate systems to identify and prevent flows of money from crime.”
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