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Amid growing regulatory scrutiny, the UK’s Financial
Conduct Authority (FCA) rejected over 87% of cryptocurrency registration
applications in its latest review, casting a shadow over the future of many
firms operating in the sector.
The high rejection rate highlights the challenge
crypto companies face in meeting the UK’s stringent anti-money laundering (AML)
requirements, which has left some firms in limbo or choosing to leave the country.
A Tough Year for Crypto Registrations
In the fiscal year ending March 31, the FCA reviewed
35 applications from crypto companies seeking approval under the UK’s AML
framework. Only four managed to clear the hurdle. The FCA named
successful registrants, including BNXA (Binance’s payment partner), a PayPal UK
unit, and Komainu, a joint venture involving Nomura for crypto custody
services.
However, the majority of applicants either withdrew
their requests, were outright rejected, or had key components missing from
their submissions, making it impossible for the regulator to conduct a full
assessment.
Since January 2020, the FCA has been responsible for
overseeing the UK’s crypto asset sector, ensuring firms adhere to strict AML
and counter-terrorist financing (CTF) regulations. In total, the regulator has
received 359 applications for registration from crypto companies since taking
on this role, approving only 44 firms so far.
Despite the FCA’s attempts to provide clear guidance
on what constitutes good and poor practice, many crypto companies still find it
difficult to navigate the UK’s regulatory framework. Long wait times and a lack
of feedback from the FCA have contributed to growing frustration among
applicants, with some companies choosing to leave the UK altogether in search
of more lenient jurisdictions.
Firms Looking Elsewhere
The prolonged registration process has led some crypto
companies to look beyond the UK. Many firms now prefer to seek approval in
other regions while continuing to serve UK-based customers from abroad.
With the Labour government’s recent pause on further
crypto-related legislation, the regulatory landscape remains uncertain, leaving many crypto firms waiting to see if rules will be loosened or
further tightened.
While the FCA has maintained its strict stance on
compliance, its long-term effectiveness in fostering a thriving crypto
ecosystem remains a topic of debate. As the regulatory landscape evolves, both
in the UK and globally, firms must adapt to ever-changing compliance
requirements or risk losing access to one of Europe’s largest financial
markets.
This article was written by Jared Kirui at www.financemagnates.com.
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