The UK Financial Conduct Authority (FCA) reported a high failure rate of 87% among crypto firms seeking licensing under the country’s money laundering regulations in the latest fiscal year. Only four companies were approved out of 35 applications submitted between April 2023 and March 2024, with the rest either rejected, refused, or withdrawn. Since the FCA began overseeing the crypto sector’s anti-money laundering compliance in January 2020, only 44 out of 356 applications have been successful.
Industry participants have cited long wait times, minimal feedback, and inconsistent treatment by the FCA as challenges faced during the registration process for crypto firms. Some companies have abandoned their applications or sought registration in more crypto-friendly jurisdictions to continue serving UK customers from abroad. The lack of transparency and clarity in the FCA’s expectations has been a criticism among rejected applicants, with the regulator defending itself by stating that it provides detailed guidance to help firms understand the requirements for registration.
The FCA’s stringent standards are designed to ensure that crypto firms adhere to robust anti-money laundering and counter-terrorist financing measures. However, the regulatory environment has been criticized for potentially stifling innovation and pushing businesses offshore. The FCA is set 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, though the regulatory evolution may be delayed due to recent government decisions.
The FCA is aiming to balance stringent regulatory oversight with fostering a vibrant and innovative crypto industry. The regulator has provided comprehensive feedback on the quality of applications received under the Money Laundering, Terrorist Financing, and Transfer of Funds Regulations 2017 to assist firms in better preparing their applications and meeting the FCA’s requirements. Aligning with the FCA’s expectations and maintaining compliance standards will be crucial for current and future applicants looking to enter the UK market.
A recent survey revealed that over a third of young adults in the UK view cryptocurrency as a key electoral issue, with many investing in digital assets for potential long-term financial gain. The interest in digital assets among young adults suggests that the regulatory stance in the country needs improvement. As the FCA continues to face challenges in balancing regulatory oversight and fostering innovation in the industry, it is essential for current and prospective applicants to meet compliance standards to secure a foothold in the UK market.
