According to the Financial Conduct Authority, 87% of the crypto companies that applied for registration in accordance with the UK money laundering regulations failed to get approval during the fiscal year.
In the 12-month period ending March 31st 2023, only four of 35 requests were approved.
Binance’s payment partner BNXA – a PayPal UK division – and Komainu – a joint venture between Nomura and Nomura – also managed to obtain licenses.
The majority of companies were either rejected or withdrawn their application.
FCA oversees the sector but companies have cited long delays and lack of clarification as major challenges.
Companies that do not meet FCA standards
Recent FCA annual reports highlight the difficulties crypto companies have in getting approval to operate in the UK.
Only four of the 35 companies that submitted applications between April 2022 to March 2023 were successful. BNXA UK, PayPal UK and Komainu are among those.
Due to insufficient submissions, the remaining applications have either been refused or withdrawn.
Only 44 out of the 359 companies that applied for approval have been approved since the FCA began overseeing compliance with anti-money laundering laws in the crypto industry in 2020.
The FCA is responsible since 2020 for the registration and monitoring of cryptocurrency firms in accordance with its regulations against money laundering.
Many companies are left out in the cold by this authority because of its strict application process.
As significant obstacles, companies have pointed to long waiting times and limited feedback.
Some companies feel that they have been treated unfairly in the registration process.
In July, the newly-elected Labour government of the UK stalled legislative progress in the crypto sector. This further complicated the regulatory environment for this industry.
High rejection rates of crypto application poses risks to the UK digital assets industry’s growth.
Some companies have sought registration elsewhere due to the FCA’s strict screening procedure.
Firms that are not FCA approved can still provide services to UK clients by locating elsewhere.
The FCA may claim that its guidelines are designed to assist firms in meeting required standards but the large number of rejected applications indicates the industry faces ongoing problems.
FCA’s position underscores the FCA’s commitment to prevent money laundering, but it also raises concerns about the future crypto eco-system in the UK.
What is next for Crypto in the UK
The FCA has been waiting for legislation to allow it to authorize companies fully to operate in the UK.
Many crypto-businesses are uncertain about the legislative delay.
The timeline to implement these changes is more uncertain now that the government has changed.
The lack of clarity amongst industry participants further increases their concerns about the viability of maintaining operations on the UK market.
For the time being, businesses must navigate within the current regulatory framework in anticipation of more definitive guidance.
The time and money invested by many crypto firms in the FCA Registration process has become an issue.
Some firms have stated that the lack of transparency and fairness has led them to completely withdraw their application.
Some companies are evaluating whether operating in the UK is worth the administrative challenges presented by the FCA framework.
The FCA has a crucial role to play in determining the future of UK crypto.
The FCA is not going to change its approach in regulating the crypto industry despite criticisms from the sector.
The firm argues its strict procedures are needed to protect the UK market against potential threats such as fraud and money laundering.
The FCA is continuing to balance the tightrope between promoting innovation and stringent regulations.
The ICD published the article UK Crypto Registration Fails to Meet High Standards: 87% Of Applications Do Not Qualify first.
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