Despite the plans to turn the region into a bustling crypto hub, the United Kingdom’s financial watchdog says it has given the all-clear to only 41 out of 300 crypto firm applications seeking regulatory approval to date.
The U.K. Financial Conduct Authority (FCA) implemented the new cryptocurrency-focused regulations on Jan. 10, 2020, to supervise businesses operating in the sector and to ensure that they’re subject to the same Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) regulations as firms in traditional financial markets.
A statement from the FCA has revealed that of the 265 applications that were “determined,” a mere 15% of these applications were approved and registered, while 74% of firms either refused or withdrew their application, and 11% were rejected. Another 35 applications are yet to be determined.
While the FCA didn’t expressly state the cause of the rejected or withdrawn applications, it did provide feedback on “good and poor quality” applications.
Among the more complete applications included a detailed description of the firm’s business model, the roles and responsibilities of business partners and service providers, sources of liquidity, flow-of-funds charts and an outline of the policies and systems set in place to manage risk, the report stated.
Incomplete applications were more apparent where companies used the application to promote their products and services, particularly in cases when the application process was still ongoing:
“Applicants’ websites and marketing material must not include language that gives the impression that making an application for registration is a form of endorsement or recommendation by the FCA.”
The report suggests that some companies may have had their applications scrapped if they couldn’t show that they have sufficient blockchain-compliance resources set in place to monitor on-chain transactions.
The FCA also doubled down on its anti-money laundering stance, demanding that all firms appoint a money laundering reporting officer who is “fully involved” in the application process.
The FCA also stressed that even for those firms that had their registrations approved, such approval doesn’t mean that they’re no longer free from obligations:
“Applicants must recognize that being registered is not a one-off formality or a tick-box exercise without any further obligations or interaction with the FCA.”
“This feedback should help applicants when they prepare their application for registration and help make the process as simple and efficient as possible,” the note said.
Among the digital asset firms to have registered under the FCA thus far include Crypto.com, Revolut, CEX.IO, eToro, Wintermute Trading, DRW Global Markets, Copper, Globalblock, Moneybrain and Zodia Markets.
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Given that many companies provide international services, the U.K. FCA also confirmed that it’s now collaborating with other state agencies around the world — most notably with the U.S. securities regulator and the U.S. commodities regulator — to strengthen regulations where necessary.
The FCA has stressed on several occasions that failure to register before conducting business may result in criminal charges.