A large number of cryptocurrency companies could be forced to terminate their UK businesses if they fail to register with the FCA by next week’s main deadline.
As of March 31, companies operating in crypto services in the UK must be registered with the Financial Conduct Authority, which is charged with overseeing how companies with digital assets Fight Money Laundering.
Last year, the regulator extended the deadline to allow provisionally registered companies to continue trading while seeking full permission – they will be closed once the deadline has passed. The FCA said several crypto companies withdrew their applications for failing to meet required anti-money laundering standards.
Now, with only a few days to go until the new deadline passes, the fate of companies on the provisional register – including the $ 33 billion fintech company Revolut and Copper, a crypto start-up that counts former British finance minister Philip Hammond as an advisor-is at hand. out of balance.
Many industry insiders have expressed frustration with the FCA’s handling of the crypto registry.
One of the lawyers advising crypto companies on their applications said the regulator was slow to approve the applications and often did not respond, a sentiment echoed by other industry figures.
“The trial was a complete disaster on the part of the FCA for business,” the lawyer told CNBC, speaking on condition of anonymity due to the sensitive nature of the case.
An FCA spokesperson said it has only approved 33 apps from crypto companies so far. More than 80% of the companies they have evaluated so far have withdrawn or rejected their application.
“We have seen a significant number of crypto-asset companies that have applied for registration and that do not meet the criteria there to ensure that companies are not used to divert or conceal criminal funds,” the spokesman said.
“Companies that do not meet the expected reference standard can withdraw their application. Companies that decide not to withdraw have the right to appeal our refusal, including through court.”
Gemini, a cryptocurrency exchange run by Tyler and Cameron Winklevoss, was one of the first to receive FCA approval.
Blair Halliday, head of Gemini UK, said the licensing system is important because it gives customers the assurance that they are dealing with a company that is subject to strict controls.
“Getting a crypto asset registration was a crucial step for cryptocurrencies in this country,” Halliday told CNBC. “It has given companies that already had that desire for regulatory approvals something to emerge as a major differentiator.”
Lavan Thasarathakumar of the Crypto Industry Association Global Digital Finance said there was “a lot of frustration” with the process.
“In essence, it has been very slow,” said Thasaratakumar, adding that the Financial Conduct Authority (FCA) handled a “huge number” of registration requests.
Some companies still withdraw their application.
This includes B2C2, the London-based cryptocurrency exchange, which recently withdrew from the FCA’s provisional register. Since Monday, the B2C2 spot trading activity has shifted to the business entity in the United States. The company said its derivatives business was unaffected as it is handled by an FCA-authorized subsidiary.
“We are committed to ensuring this move causes as little disruption as possible and are working closely with our customers to ensure they continue to have a smooth trading experience with us,” a B2C2 spokeswoman told CNBC via Telegram.
Companies whose applications have been rejected by the Financial Conduct Authority (FCA) can appeal, but the procedure takes a long time and may have to go to court.
A court recently confirmed the FCA’s decision to reject an application from crypto exchange Gidiplus.
Profit from the departure of Great Britain from the European Union?
Mauricio Magaldi, director of global crypto strategy at financial consultancy 11:FS, said the current regulatory trend in the UK puts the country at risk of falling behind the US, EU and other regions.
President Joe Biden has signed an executive order demanding coordination from the government on censorship of digital currencies, while European lawmakers recently called: they voted against the proposal it would effectively ban bitcoin mining in the block.
“While major jurisdictions are discovering opportunities and risks, the UK is highlighting the risks,” Magaldi told CNBC. “By going too fast and too narrow, the rules and timetables create obstacles for crypto companies that can replace them from the UK market.”
Industry representatives fear this could put the UK at a disadvantage at a time when it is vying to become a world leader in financial innovation after Brexit. The country is home to a thriving and attractive FinTech industry with nearly $ 12 billion in investments last year.
But fast-growing fintech companies like Revolut and Copper may soon have to end their crypto operations in the UK and move abroad if they are not on the full register. Both companies declined to comment when CNBC contacted them.
Companies like PayPal which sells crypto services in the UK through foreign affiliates, are not affected.