This article briefly:
A SmartSearch survey shows that more than 25% of UK cryptocurrency companies question the Financial Conduct Authority’s involvement in crypto products.
75% of firms face challenges with their FCA registration application, with 37% seeking additional guidance during the process.
The FCA has also faced criticism for its regulatory approach to smaller cryptocurrency firms, which often struggle to comply.
British cryptocurrency firms are growing tired of dealing with the country’s Financial Conduct Authority (FCA) and its complex rules, according to a survey published today by SmartSearch and seen by Reuters.
The research, conducted by Censuswide between May 26 and July 2, 2023, involved 500 industry compliance decision-makers. More than a quarter of respondents questioned the FCA’s involvement in crypto products. Three quarters faced challenges with FCA registration, and 37% felt additional guidance was needed in the process.
FCA Cracks Down on UK Crypto ATMs
Interestingly, over-the-counter (OTC) traders have shown more openness to the FCA’s involvement than cryptocurrency exchanges. Is the FCA painting too broad a picture? Trying to hammer a square peg into a round hole?
The FCA is the regulator for financial services and markets in the UK. Currently, businesses operating as exchanges, cryptocurrency ATM companies, and crypto asset custody service providers are required to register if they intend to operate in the UK. This is no different from the regime in many other countries.
However, the FCA has a mixed history and reputation in the cryptocurrency industry, choosing to take brutal action in certain areas. For example, the regulator has taken a hard line against cryptocurrency ATMs in the country, authorizing raids on many businesses that host these machines.
As of this writing, there are only six cryptocurrency ATMs active in the country, which authorities have linked to money laundering.
On Jan. 26, the FCA revealed that 85% of crypto asset firms failed to meet its anti-money laundering and counter-terrorist financing standards, a fact that prompted MP and Treasury Committee Chair Harriett Baldwin to refer to parts of the industry as the “Wild West.”
Multiple sources told reporters that their deal with the FCA made sense. Still, many expressed concerns about the compliance burden on smaller firms.
Andrew Boyd, co-founder and managing director of Finty, told reporters that the FCA’s regulation of cryptocurrencies is “marked by a careful, methodical approach.” However, the agency’s strict approach could be “a challenge for smaller firms.”
UK hopes to become digital asset hub
Syndika co-founder and CBO On Yavin told reporters that the FCA is “terrible” for cryptocurrency companies. He said, “Not as much as the SEC, but it’s definitely bad.”
In Yavin’s opinion, the FCA does not understand cryptocurrencies. Its expertise is particularly lacking when it comes to decentralized finance (DeFi).
He continued, "The FCA isn't really helping crypto companies as much as they should. The regulatory process for crypto companies is unclear and overly complicated, and the FCA isn't dealing with crypto scams the way they should. I know this from my personal experience and from other people I know who have reported scams to the FCA, but they completely ignore all scam alerts."
An also compared it to regulators in Germany, Japan, Singapore and Hong Kong, which are "doing more".
Current Prime Minister Rishi Sunak has attempted to position the United Kingdom as a “crypto hub.” On June 5, lawmakers sympathetic to the cryptocurrency industry called on the government to appoint a “crypto czar” to help achieve this goal.
However, Andrew Griffith, the UK Treasury’s economic secretary, told MPs on June 13 that the UK had no plans to do so.
The FCA operates on many fronts. Most recently, the FCA has stepped up its crackdown on cryptocurrency advertising and social media “financial influencers.”
The agency has warned cryptocurrency firms marketing to UK customers to fully comply with its guidelines by October 8, 2023. On July 17, the FCA also warned that certain social media communications, including memes, could violate its guidelines.