July 4, 2022

Cryptocurrency firms face UK boot as FCA registration deadline approaches

Cryptocurrency firms face UK boot as FCA registration deadline approaches

New Bitcoin token depicted on a £10 note.

Matt Cardi | Getty Images

LONDON – A large number of cryptocurrency companies may be forced to wind down their UK businesses if they fail to register with the Financial Conduct Authority before next week’s main deadline.

From March 31, companies operating in crypto services in Britain must be registered with the Financial Conduct Authority, which is charged with overseeing how digital asset companies combat money laundering.

Last year, the regulator extended the deadline to allow provisionally registered companies to continue trading as they seek full authorization – they will be closed once the deadline has passed. The FCA said that several crypto companies withdrew their applications because they did not meet the required anti-money laundering standards.

Now, with just a few days left until the new deadline passes, the fate of companies on the provisional registry — 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 up for grabs. suspended. balance.

complete disaster

Several industry insiders have expressed frustration with the FCA’s handling of the crypto registry.

One of the lawyers advising crypto firms on their applications said the regulator was slow to approve applications and often did not respond, a sentiment echoed by other industry figures.

“The process was a complete disaster on the part of the FCA for matters,” the attorney told CNBC, speaking on condition of anonymity due to the sensitive nature of the matter.

A spokesperson for the FCA said it has only approved 33 crypto companies’ apps so far. More than 80% of the companies they have evaluated so far have either withdrawn or rejected their applications.

“We have seen a significant number of crypto-asset companies that have applied for registration that do not meet the criteria there to help ensure that companies are not used to divert or conceal criminal funds,” the spokesperson said.

“Companies that do not meet the expected reference standard can withdraw their applications. Companies that decide not to withdraw have the right to appeal our refusal, including through the courts.”

why does it matter

Gemini, a cryptocurrency exchange run by Tyler and Cameron Winklevoss, was among the first to receive FCA approval.

Blair Halliday, head of Gemini UK, said the licensing system is important because it provides clients with the assurance that they are dealing with a company that has been subject to rigorous scrutiny.

“Getting a crypto asset registration was a critical 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 key differentiator.”

Lavan Thasarathakumar of the Crypto Industry Association Global Digital Finance said there was “a lot of frustration” about the process.

“Essentially, it’s been very slow,” Thasaratakumar said, adding that the Financial Conduct Authority (FCA) was handling a “huge number” of registration requests.

Some companies are still withdrawing their applications.

This includes B2C2, the London-based cryptocurrency exchange, which recently pulled out of the FCA’s provisional registry. Since Monday, B2C2 spot trading activity has shifted to the corporate entity in the United States. The company said its derivatives business was not affected 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.

Businesses whose applications have been rejected by the Financial Conduct Authority (FCA) can appeal, but the process is lengthy and may need to go through the courts.

A court recently upheld the decision of the Financial Conduct Authority (FCA) to reject an application from crypto exchange Gidiplus.

Profits of Britain’s exit from the European Union?

Mauricio Magaldi, director of global crypto strategy at fintech consultancy 11:FS, said the current UK regulatory trend puts the country at risk of falling behind the US, EU and other regions.

President Joe Biden has Sign an executive order They demanded coordination from the government on censorship of digital currencies, while European lawmakers recently called for They voted against the proposal It would have effectively banned bitcoin mining in the block.

“While major jurisdictions are discovering opportunity and risks, the UK is emphasizing the risks,” Magaldi told CNBC. “By moving too fast and too narrow, the rules and timeframes 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 be a global leader in financial innovation after Brexit. The country is home to a thriving and attractive FinTech industry Nearly $12 billion in investment last year.

But fast-growing fintech companies such as Revolut and Copper may soon have to end their crypto activities in Britain and move abroad if they are not on the full registry. Both companies declined to comment when contacted by CNBC.

companies like PayPal And the Queen PieceLtd., which sells crypto services in the UK through overseas affiliates, will not be affected.