A new Crypto or bitcoin token photographed on a £10 note.
Matt Cardy | fake images
LONDON – Several cryptocurrency companies may be forced to cease their activities in the United Kingdom if they do not register with the financial regulator before a key deadline next week.
As of March 31, companies operating crypto services in the UK must register with the Financial Conduct Authority, which is tasked with overseeing how companies with digital assets combat money laundering.
Last year, the regulator extended the deadline, allowing companies on provisional registration to continue operating while seeking full approval; It will be closed when the term expires. The FCA said that many crypto firms withdrew their applications because they did not meet required money laundering standards.
Now, with just days to go before the new deadline, the fate of companies on the preliminary registration, including fintech Revolut and Copper, stands at $33 billion, a crypto firm founded by former British finance minister Philip Hammond as an adviser. . – is in the balance.
“A Total Disaster”
Many industry insiders have expressed frustration with the FCA’s handling of the crypto registry.
A lawyer advising cryptocurrencies on their applications said the regulator has been slow to approve applications and often unresponsive, a view shared by other industry experts.
“The process was a complete disaster from the FCA’s perspective,” the lawyer told CNBC, speaking on condition of anonymity due to the sensitive nature of the case.
An FCA spokesperson said that applications from only 33 crypto firms have been approved so far. More than 80% of the companies evaluated so far have either withdrawn their application or been rejected.
“We have seen a large number of crypto-active businesses applying for registration that do not meet the standards there to ensure that the businesses are not used to transfer and/or conceal criminal funds,” the spokesperson said.
“Companies that do not meet the expected benchmark can withdraw their application.
why does it matter
Gemini, the cryptocurrency exchange run by Tyler and Cameron Winklevoss, was one of the first companies approved by the FCA.
Blair Halliday, UK director of Gemini, said the licensing system is important because it gives customers the peace of mind that they are dealing with a company that has undergone extensive vetting.
“Establishing a crypto asset registry was a crucial step for crypto in this country,” Halliday told CNBC. “There have been companies that have a real desire to apply for regulatory approvals, something they can demonstrate as an important differentiator.”
Lavan Thasarathakumar of the crypto industry association Global Digital Finance said there was “a lot of frustration” over the process.
“Basically, it was too slow,” Thasarathakumar said, adding that the FCA was struggling with a “huge backlog” of applications for registration.
And some companies are still withdrawing their applications.
These include B2C2, the London-based cryptocurrency trading company that recently withdrew from provisional FCA registration. As of Monday, all spot trading activity has moved from B2C2 to the company’s US unit. The company said its derivatives business was not affected as it is operated by an FCA-licensed subsidiary.
“We are committed to ensuring this move causes as little disruption as possible and to work closely with our clients to ensure they continue to have a seamless trading experience with us,” a B2C2 spokeswoman told CNBC via Telegram.
Companies whose applications have been rejected by the FCA can appeal, but the process is lengthy and they may need to go to court.
Recently, an arbitration panel sided with the FCA in rejecting a request from cryptocurrency exchange Gidiplus.
Mauricio Magaldi, director of global strategy for crypto at fintech consulting firm 11:FS, said Britain’s current legislative direction puts the country in danger of falling behind in the US, EU and other regions.
President Joe Biden signed an executive order calling on the government to coordinate oversight of digital currencies, while EU lawmakers recently rejected a proposal that would have effectively banned bitcoin mining in the bloc.
“While the major jurisdictions acknowledge the possibility and the risk, the UK emphasizes the risk,” Magaldi told CNBC. “By moving too fast and too tight, the rules and timelines create hurdles for crypto businesses that could force them out of the UK market.”
Industry officials fear it could work to Britain’s detriment at a time when it struggles to be a world leader in financial innovation after Brexit. The country is home to a thriving fintech industry that last year attracted nearly $12 billion in investment.
But fast-growing fintechs like Revolut and Copper may soon be forced to close their UK crypto operations and go abroad if they don’t make the full list. Both companies declined to comment when contacted by CNBC.
Companies like PayPal and Coinbase, which sell crypto services in the UK through foreign affiliates, are not affected.