The UK Financial Conduct Authority (FCA) reported an 87% failure rate among crypto firms seeking licensing under the country’s money laundering regulations in the latest fiscal year. Only four out of 35 applications were approved between April 2023 and March 2024. The FCA has processed 359 applications since January 2020, with only 44 firms successfully registered, highlighting the challenges faced by crypto companies during the registration process. Industry feedback suggests long wait times, minimal feedback, and inconsistent treatment by the FCA have made it difficult for firms to meet the regulator’s rigorous standards.
Criticism of rejected applicants includes the lack of transparency and clarity in the FCA’s expectations. The regulator provides detailed guidance to help firms understand the requirements for registration, but many applications lack key components necessary for a thorough assessment. Some submissions were deemed invalid due to poor quality or incomplete information. The FCA’s stringent standards aim to ensure that crypto firms adhere to robust anti-money laundering and counter-terrorist financing measures, but the strict approach has raised concerns about stifling innovation and pushing businesses offshore.
The FCA is poised to gain more control over the crypto sector pending new legislation granting it the power to authorize crypto companies to operate fully within the UK. However, the new Labour government has paused crypto-specific legislative plans, delaying regulatory evolution. Balancing stringent regulatory oversight with fostering a vibrant and innovative crypto industry remains a challenge for the FCA. To assist potential applicants, the FCA provides comprehensive feedback on the quality of applications received, aiming to improve the approval rate in the future.
Aligning with the FCA’s expectations and maintaining rigorous compliance standards will be essential for current and prospective applicants looking to secure a foothold in the UK market. A survey by Zumo and Focaldata found that over a third of young adults in the UK view cryptocurrency as a key electoral issue, indicating growing interest in digital assets among the population. Many young adults see digital assets as a potential long-term financial gain and have friends or family involved in crypto investments. The survey highlights the importance of improving the regulatory stance to support the growth of the crypto industry in the UK.
Overall, the FCA’s strict regulatory approach has resulted in a high failure rate for crypto firms seeking licensing in the UK. The challenges faced by applicants include long wait times, minimal feedback, and inconsistent treatment by the regulator. The lack of transparency and clarity in the FCA’s expectations has also contributed to the high rejection rate. Moving forward, aligning with the FCA’s standards and maintaining compliance will be crucial for firms looking to enter the UK market. The growing interest in cryptocurrency among young adults further emphasizes the need for improved regulatory clarity to support the industry’s growth and innovation.
