FCA faces backlash from crypto industry amid regulatory uncertainty
The UK’s crypto industry has voiced concerns that the financial watchdog’s stringent regulatory standards are pushing firms offshore.
This week the Financial Conduct Authority (FCA) u-turned on a requirement for crypto firms operating under its temporary register to secure approval by a 31 March deadline.
Firms on the temporary register, including prominent UK fintechs such as Revolut, Copper and Blockchain.com, will be allowed to continue trading past the deadline while they appeal the regulator’s decision or seek approval offshore.
Ian Taylor, Executive Director at CryptoUK, a body representing Britain’s crypto industry, noted that 80 per cent of UK firms that have sought approval from the regulator have been unsuccessful.
“The impact for those companies is that they will have to operate off-shore,” Taylor said. “This means that there will be no consumer oversight if a UK citizen buys products from an online business domiciled in Malta, for example as they may still sell their services into the UK.”
Crypto firms Wirex and BCB2 announced their intention to withdraw their applications and secure permits elsewhere this week as the deadline loomed.
“Consumers will therefore have no recourse from the regulator, as the firm will operate outside the UK jurisdiction, which is bad for British consumer protection,” Taylor added, noting thousands of jobs could be lost if British crypto firms migrate.
Mikkel Morch the executive director at digital asset hedge fund ARK36 dubbed the regulator’s approach to crypto firms “a little-less-than-friendly.”
“It is hard to imagine that any financial market can systematically boycott crypto and still hope to stay relevant – let alone competitive,” Morch commented.
Morch urged firms to proactively engage with the regulator and “recognize that additional effort may be needed on their part in order for them and financial regulators to achieve a productive common ground and mutual understanding.”
In comments to City PM the FCA defended its approach to regulation and explained that many firms failed to meet “minimum standards” necessary to ensure Britain’s financial system is not open to abuse by those laundering money made through violence, drugs, corruption or the exploitation of others.
“While we have registered 33 firms, we have seen too many financial crime red flags missed by the cryptoasset businesses seeking registration. Worse, we have seen examples where firms do not have the controls necessary to raise red flags in the first place,” an FCA spokesperson said.
Read more: FCA spares UK crypto firms from ejection by waiving key deadline