The UK’s
Financial Conduct Authority (FCA) has defended its “too tough” approach to
registering cryptocurrency firms, arguing that robust standards are essential
for building a sustainable and trustworthy digital asset sector.
In a
statement released today (Monday), Val Smith, Head of Payments and Digital
Assets at the FCA’s authorizations division, addressed criticism that the
regulator’s stringent requirements could potentially stifle innovation in the
crypto industry and that the bar for registration is set “too high.”
Crypto Companies Want to
Build on Sand. FCA Wants to Build on “Sturdy Foundations”
“Innovations
built quickly on unsafe, unregulated and untrusted foundations become a house
built on sand – likely to collapse,” Smith warned. “Instead, we want
to closely collaborate with partners across government, industry and other jurisdictions
to develop a crypto sector that’s built on reliable, sturdy foundations.”
The FCA has
faced scrutiny over the relatively low number of crypto firms it has registered
under the UK’s Money Laundering Regulations (MLRs). Some industry observers
have suggested the regulator’s standards may be too high, potentially
jeopardizing the UK’s position as a global financial leader.
Smith
pushed back against these claims, emphasizing that the FCA never dismisses
applications outright and takes the risk of financial crime seriously.
“Allowing illicit money to flow freely can destroy lives,” she
stated, citing concerns about terrorism, organized crime, sanctions evasion,
and human trafficking.
It is
undeniable, however, that the FCA takes a strict approach to regulating the
industry. Since 2020, the watchdog has received around 360 registration
applications, approving barely 50 of them. The full list of registered
cryptoasset firms is available on the institution’s website. In 2024, only
three entities were added to the list.
In
September, Finance Magnates reported that nearly 9 out of 10 crypto
registration applications failed to meet AML standards. On the other hand, the
FCA has been effective in tracking dishonest firms in the sector. According to
an August report, the institution issued 1,000 warnings and removed 48
potentially suspicious applications since October of last year.
FCA “Actively Wants to
Work with You”
The
regulator stressed its commitment to working with crypto firms throughout the
application process, offering pre-application meetings and practical support.
Smith acknowledged that the crypto industry is still developing and that
adapting to new regulatory processes can be challenging.
“We
actively want to work with you,” Smith said, encouraging firms to engage
with the FCA early and utilize the available resources.
While the
number of registered crypto firms remains a topic of interest, Smith insisted
that the FCA’s focus must remain on protecting consumers and maintaining the
integrity of the financial system. She argued that upholding high regulatory
standards is crucial for creating a “healthy, globally competitive and
vibrant crypto sector in the UK.”
Another
issue is the number of people employed by the FCA in the cryptocurrency sector.
According to Quant, the UK may face a “crypto catastrophe” due to
staff shortages. In an email sent to Finance Magnates, a spokesperson
for the regulator answered to these allegations, stating, “Crypto is an
area of work that spans the entire FCA, and our increased staffing levels
reflect our investment in these priorities.”
This article was written by Damian Chmiel at www.financemagnates.com.
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