Invezz.com - The Financial Conduct Authority (FCA) reported 87% of crypto companies applying for registration under the UK’s money laundering rules failed to receive approval in the last fiscal year.
Only four out of 35 applications were approved in the 12 months ending March 31, 2023.
Meanwhile, Binance’s payments partner, BNXA, a PayPal (NASDAQ:PYPL) UK unit, and Komainu, a joint venture with Nomura, managed to secure licences.
The vast majority of firms, however, were refused, rejected, or withdrew their applications.
The FCA continues to oversee the sector, but many companies cite long waits and lack of clarity as key challenges.
Crypto companies not meeting FCA standards
The FCA’s recent annual report highlights the challenges crypto companies face in gaining approval for operating in the UK.
Out of 35 applications submitted between April 2022 and March 2023, only four companies—BNXA, PayPal UK, and Komainu among them—successfully registered.
The remaining applications were either refused or withdrawn due to inadequate submissions.
Since the FCA took on the role of overseeing anti-money laundering compliance in the crypto sector in 2020, a mere 44 companies have managed to gain approval out of 359 applications.
Since 2020, the FCA has been responsible for the registration of crypto firms under its anti-money laundering regulations.
The authority’s stringent process requires applicants to meet high standards, but many companies have been left in the lurch.
Companies have cited long waiting periods and limited feedback as significant hurdles.
Some firms feel they were treated unfairly during the registration process.
The UK’s newly elected Labour government in July has also stalled crypto-related legislative progress, further complicating the regulatory landscape for the sector.
The high rejection rate of crypto applications poses potential risks for the growth of the UK’s digital asset industry.
The FCA’s rigorous screening process has led some companies to seek registration in other jurisdictions.
For example, firms not approved by the FCA can still serve UK customers by being based elsewhere.
While the FCA claims its guidance aims to help firms meet required standards, the significant number of rejections indicates ongoing challenges for the sector.
The FCA’s stance underscores its commitment to preventing money laundering but also raises questions about the future of the crypto ecosystem in the UK.
What’s next for crypto in the UK?
The FCA is currently awaiting legislation that would enable it to fully authorise companies to operate within the UK.
The delay in this legislative process is a source of uncertainty for many crypto businesses.
With the recent change in government, the timeline for implementing these changes has become more unpredictable.
This lack of clarity further fuels concerns among industry players about the feasibility of sustaining operations in the UK market.
For now, companies must continue to navigate the existing regulatory framework while awaiting more definitive guidance.
For many crypto companies, the time and resources invested in the FCA registration process have become a contentious issue.
As stated by some firms, the perceived lack of fairness and transparency has prompted a few to withdraw their applications altogether.
These sentiments are prompting some companies to evaluate whether the benefits of operating in the UK outweigh the bureaucratic challenges posed by the FCA’s current framework.
With a substantial number of firms either opting to operate from other locations or withdrawing, the FCA’s role in shaping the future landscape of the UK’s crypto industry remains crucial.
Despite criticism from the industry, the FCA remains firm in its approach to regulate the crypto sector.
It argues that its stringent procedures are necessary to ensure only compliant firms operate within the UK, thereby safeguarding the market from potential risks such as money laundering and fraud.
With over 87% of applications facing rejections or withdrawals, it is evident that the balance between stringent regulation and fostering innovation is a tightrope that the FCA continues to walk.
This article first appeared on Invezz.com
