A novel bitcoin token photographed on a £10 note.
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LONDON – A number of cryptocurrency companies could be forced to cease operations in the UK if they fail to register with the Financial Regulator before a key deadline next week.
From March 31, firms operating crypto services in the UK must be registered with the Financial Conduct Authority, which is tasked with overseeing how digital asset firms combat money laundering.
Last year, the regulator extended the deadline that allowed firms on a tentative register to continue trading while they sought full approval – it will close once the deadline expires. The FCA said many crypto companies withdrew their applications as they failed to meet required anti-money laundering standards.
Now, with just days until the new deadline, the fate of firms is on the tentative register — including $33 billion fintech Revolut and Copper, a crypto start-up founded by former UK Treasury Secretary Philip Hammond as an advisor counts – in the balance the balance.
“A Total Disaster”
Many industry insiders have expressed frustration with the FCA’s handling of the crypto registry.
An attorney who advises crypto companies on their applications said the regulator has been slow to approve applications and often unresponsive, an assessment shared by other industry figures.
“The process was a total disaster from the FCA’s perspective,” the attorney told CNBC, speaking on condition of anonymity due to the sensitive nature of the matter.
An FCA spokesman said that applications from only 33 crypto firms have been approved so far. More than 80% of the companies evaluated to date have either withdrawn their application or been rejected.
“We have seen that a large number of cryptoasset companies applying for registration do not meet the standards there to ensure companies are not used to transfer and/or conceal criminal funds,” the spokesperson said.
“Companies that do not meet the expected benchmark can withdraw their application.
Why it matters
Gemini, the crypto exchange run by Tyler and Cameron Winklevoss, was among the first firms to be authorized by the FCA.
Blair Halliday, Gemini’s Head of UK, said the licensing system is important as it gives customers peace of mind that they are dealing with a company that has undergone rigorous scrutiny.
“Establishing a crypto asset registry was a crucial step for crypto in this country,” Halliday told CNBC. “There have been companies that have a real desire to apply for regulatory approvals, something they can demonstrate as a key differentiator.”
Lavan Thasarathakumar of crypto industry association Global Digital Finance said there was “a lot of frustration” with the process.
“Basically, it was too slow,” said Thasarathakumar, adding that FCA was struggling with a “huge backlog” of applications for the register.
And some companies are still withdrawing their applications.
These include B2C2, the London-based crypto trading company that recently withdrew from the FCA’s provisional register. As of Monday, all spot trading activity has shifted from B2C2 to the company’s US unit. The firm said its derivatives business was unaffected as it is transacted by an FCA-authorized subsidiary.
“We are committed to ensuring that this move causes as little disruption as possible and are working closely with our customers to ensure they continue to have a seamless trading experience with us,” a B2C2 spokeswoman told CNBC via Telegram.
Companies whose applications have been rejected by the FCA can appeal, but the process is lengthy and may have to go to court.
An arbitration panel recently sided with the FCA in denying a request from crypto exchange Gidiplus.
Mauricio Magaldi, global strategy director for crypto at fintech consultancy 11:FS, said the UK’s current regulatory direction puts the country at risk of falling behind the US, European Union and other regions.
President Joe Biden has signed an executive order calling on the government to coordinate oversight of digital currencies, while EU lawmakers recently rejected a proposal that would have effectively banned bitcoin mining in the block.
“While the major jurisdictions recognize the opportunity and the risk, the UK is emphasizing the risk,” Magaldi told CNBC. “By moving too fast and too tight, rules and timeframes create hurdles for crypto firms that could potentially force them out of the UK market.”
Industry officials fear it could disadvantage Britain at a time when it is struggling to be a global leader in financial innovation post-Brexit. The country is home to a thriving fintech industry that attracted nearly $12 billion in investment last year.
But fast-growing fintechs like Revolut and Copper could soon be forced to shut down their crypto operations in the UK and go abroad if they don’t make the full list. Both companies declined to comment when contacted by CNBC.
Companies like PayPal and Coinbase, which sell crypto services in the UK through overseas subsidiaries, will not be affected.
https://www.cnbc.com/2022/03/24/crypto-firms-face-being-booted-from-uk-as-fca-register-deadline-nears.html Crypto Firms Booted Out of UK as FCA Registration Deadline Approaches