The United Kingdom’s Financial Conduct Authority (FCA) takes over a year to process registration applications for crypto asset exchanges and custodian wallet providers, according to an analysis by the law firm Reed Smith, based on average wait times over the past three years. Following a wave of application withdrawals, few new applications are being submitted.
Reed Smith made a Freedom of Information request to obtain three years’ worth of data for a survey of FCA activities, the Financial Times reported.
FCA may not prioritize applicants
It has taken an average of 459 days to process a crypto firm’s registration in the last three years. The agency has spent 25 years of manpower on the applications, the law firm discovered. While the agency is picking up its pace, the long wait has implications, Reed Smith partner Brett Hillis said:
“It does seem that even though approval times are falling, the time taken to grant approval remains something of a drag on the UK’s broader ambition to become a crypto hub.”
The long processing time does not mean the agency has been inactive on the crypto front. Since the new rules on crypto asset promotion came into force in October 2023, the FCA has issued application extensions and repeated guidance.
The FCA has enforced the new rules vigorously, although the UK National Audit Office criticized the agency’s enforcement efforts in a December report. It noted that the agency may lack enough qualified staff for effective enforcement.
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The applicant pool is drying up
The FCA has observed a steady decline in the number of crypto firms applying for registration. In the first quarter of 2024, only seven firms applied, with a total of 29 applications submitted between May 2023 and April 2024. This is a decrease from 42 applicants in the previous year and 59 the year before that.
Source: Reed Smith LLP
Meanwhile, 186 forms withdrew their applications in the three-year window. The declining number of applicants may be a mixed blessing, Hillis said:
“If it’s the case that applications are falling because crypto firms have essentially given up waiting and started looking abroad, this should send a clear warning about London’s competitiveness.”
“The good news is that the falling number of applications suggests that firms are now much better acquainted with what the regulator expects,” Hillis added.
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