The UK Financial Conduct Authority (FCA) only registered four out of 35 companies that applied for licensing in the country over the 12-month period ending March 31, 2024, representing an 87% failure rate. The regulator attributes the failure rate to firms’ weak anti-money laundering controls.
In its annual report, the FCA claims its regulatory approach has made more people aware of potential crypto scams. Some of the successful firms registered included BNXA, a partner for Binance, Koamainu, and PayPal UK Unit.
47 out of 340 crypto registration applications approved in 3 years
The high number of failed applications is not peculiar to the 2023 fiscal year alone. The FCA report also showed that since January 2020, when it got the mandate to register crypto entities, 340 applications have been submitted, but only 47 have been registered, representing 14% of all applications.
The FCA has rejected 40 firms (12%) and refused 13 (4%), while 240 of these applications (70%) have been withdrawn. According to the FCA, the failure rate is because most companies did not meet specific requirements, noting that a weak anti-money laundering process is the key reason for rejecting so many of these firms.
It said in a feedback statement:
“We have rejected submissions that didn’t include key components necessary for us to carry out an assessment, or the poor quality of key components meant the submission was invalid.”
FCA has been registering crypto companies under its anti-money laundering rules because there is no specific crypto regulation in the country yet. However, that regulation might not come anytime soon now that Labour has wrested power from the Rishi Sunak-led administration that prioritized crypto. The Labour government already paused crypto policy plans in July.
Crypto firms blame failure rate on tough stance and long wait time
Crypto companies have a different narrative from the FCA, with many blaming the failure of the lengthy registration process and the lack of feedback from authorities. According to reports, the FCA takes an average of 459 days to process a crypto firm’s registration.
The regulator has also been tough on crypto firms, issuing over 1,000 warnings to them since the rules on crypto advertising went into effect in October 2023. It has also caused the removal of 48 crypto apps from UK app stores.
In response to the long wait times and uncompromising stance, many crypto companies have opted to withdraw and operate outside the UK to serve customers in the country. However, the regulator does not believe its strict standards are the problem, noting that it has been clear in its communication with firms.
It said:
“We help firms applying for authorization by communicating our expectations and issuing guidance on good and poor practice. This is helping firms understand what is required – 44 crypto firms now have money laundering registration.”
Meanwhile, the number of applications has also been falling, showing that many firms are not even bothering to try. The FCA data shows that applications as crypto exchanges or service providers fell 51% in the last three years, with only 29 applications submitted between May 1, 2023, and April 30, 2024.
