In recent years, the Financial Conduct Authority (FCA) has been in charge of regulating so-called ‘crypto asset’ businesses in the United Kingdom, requiring them to register with it and comply with the country’s strict anti-money laundering and counter-terrorist financing (AML/CFT) laws.
Since then, the vast majority of applications have been refused, rejected, or withdrawn. In the past 12 months, of the 90 applications submitted, only eight were approved, while three were refused, nine were rejected, and 70 were withdrawn.
In typical fashion, industry representatives in the U.K. have blamed the FCA for the abysmal success rate rather than reflecting on their own credibility and processes. The All Party Parliamentary Group for Crypto and Digital Assets, an industry-funded lobbying group, called for the FCA to overhaul its “burdensome and lengthy” registration process.
It’s yet another example of how entitled players in the digital currency space believe the laws and regulations of sovereign nations should bend to their will rather than the other way around.
“We have rejected submissions that didn’t include key components necessary for us to carry out an assessment, or the poor quality of key components meant the submission was invalid,” the regulator said.
Opinion: FCA unlikely to bend, instead will intensify scrutiny
In April 2022, then-Chancellor Rishi Sunak stated his ambitions for the U.K. to become a global hub for digital currencies and assets. While some in the industry have criticized the FCA’s approval rating of applicants, saying it conflicts with the Prime Minister’s stated ambitions, it could also be argued that, in the long run, the strict regulations give the U.K. extra credibility.
While there have been warnings that the registration process will cause businesses to “invest elsewhere,” nothing is said about the quality of these businesses and whether the U.K. would want their “investment.” A leading economy renowned for its best-in-class financial sector will benefit from picking the cream of the crop and letting them operate in a well-regulated market rather than opening the floodgates to every fly-by-night firm with ‘blockchain’ in its name.
The FCA is unlikely to bend or overhaul its policies as the All Party Parliamentary Group for Crypto and Digital Assets and others like it have called for. If there was any hope of an easing of the regulatory burdens, it has been lost in the wake of the carnage that has unfolded in 2022 with the collapse of FTX, Three Arrows Capital (3AC), Celsius Network, and other previously industry-leading companies.
As the Gemini twins fight it out in court with Digital Currency Group’s (DCG) Barry Silbert, Sam Bankman-Fried answers to an ever-growing list of changes, and Coinbase (NASDAQ: COIN) and Binance defend themselves against the Securities and Exchange Commission’s (SEC) accusations of operating as unregistered securities exchanges, it’s more likely that the FCA and other regulators will tighten up, make the rules that exist stricter, and chase away amateur operations incapable of filing paperwork correctly and demonstrating compliance with AML/KYC rules.
It’s amateur hour in the digital currency business
In short, because of its own greed and dishonesty, the digital currency industry has shot itself in the foot, and rather than cooperating with and listening to the requests of industry lobbying groups, regulators worldwide are likely to dismiss them and ignore their pleas.
In the long run, the 9% approval rating for U.K. applications will paint the country positively and perfectly align with Prime Minister Sunak’s ambitions to become a leading global digital asset hub. The FCA should clarify and simplify its application process where possible, but it should not heed the warnings of pressure groups with no agenda other than making it easier for dicey businesses to enter and do business in the country. The FCA should hold firm; either show you comply with AML/CTF regulations or go elsewhere.
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