FCA goes six months without registering a single crypto firm amid criticism of tough regime

The City watchdog has gone six months without registering a crypto firm, amid criticism that its tough approach to regulation poses a risk to the UK’s competitiveness in digital assets.

The Financial Conduct Authority (FCA) has not approved a crypto firm under anti-money laundering (AML) and counter-terrorist financing (CTF) rules since 27 February, according to its list of registered businesses.

These controls must be approved by the FCA for companies to provide most cryptoasset services in the UK.

Separate figures show the vast majority of firms that apply for registration under the regime fail to pass through, with the regulator recently seeing a drop-off in application volumes.

Since it began supervising the process in January 2020, the FCA has received 356 applications for registration under the AML and CTF regulations introduced by the government in 2017.

However, just 47 (14 per cent) of the 336 applications it has determined have been successful. In the 12 months to the start of August, the regulator received just 34 applications.

Of the 29 it considered during this time, 86 per cent failed. More than half (55 per cent) were withdrawn, while the watchdog rejected and refused 21 per cent and 10 per cent respectively.

While the FCA’s figures raise questions over corporate governance within the crypto industry – which has long been associated with illicit activity – some argue the regulator could do more to support these companies.

In April 2022, then prime minister Rishi Sunak laid out his ambition for the UK to become a “global hub for cryptoasset technology”.

But Lisa Cameron, a Conservative MP and chair of the Crypto and Digital Assets All-Party Parliamentary Group, told City A.M. in April that firms were moving to places like the United Arab Emirates and European Union after becoming “very bogged down” with the FCA’s process.

“A regulator that provides very little guidance outside of to seek legal advice, often at their own expense, dissuades people from setting up shop or advancing these technologies in the UK,” said Irfan Baluch, a partner at law firm Cripps.

The newly-elected Labour government has yet to outline any policy proposals on the area.

An FCA spokesperson told City A.M. on Tuesday: “We offer significant support for firms interested in applying and register those that demonstrate they can meet the required standards.

“We expect firms to be fit and proper and have adequate systems to identify and prevent flows of money from crime. These standards that we hold firms to are essential to help protect people and the integrity of our financial system.” 

Then City minister Andrew Griffith reportedly urged the FCA last October to show restraint on its new crypto advertising rules following concerns from firms over their broad scope.