- UK’s FCA reports that 90% of crypto firms lack fraud and money laundering safeguards.
- Only 14% of firms have successfully registered for crypto licenses.
- Over 240 firms withdrew applications, citing stringent compliance demands.
- The FCA aims to guide firms on better anti-fraud and anti-money laundering practices.
In a bid to make the UK a global leader in Web3 and crypto innovations, financial regulators are increasing oversight on crypto firms. A recent report from the Financial Conduct Authority (FCA) revealed alarming statistics: 90% of crypto firms applying for registration were rejected. The primary issue? A lack of robust precautions against money laundering and fraud. This marks a significant concern as regulators focus on protecting the integrity of the UK’s growing crypto sector.
The FCA has been crystal clear—firms must be more prepared to meet the strict regulatory requirements if they want to operate legally. This announcement is aimed not just at crypto firms, but also at consultants and trade associations in the industry, urging them to improve their compliance measures.
Crypto Firms Under Scrutiny
The UK’s regulatory framework for crypto firms became a reality in July 2023, with the aim to both protect investors and prevent illicit activities like fraud and money laundering. Since then, the FCA has received 359 applications for crypto registration. The outcome has been sobering: only 47 firms successfully registered (14%), while 40 firms had their applications rejected outright. An even larger number—240 firms (70%)—withdrew their applications before the FCA could make a decision. The remaining 4% of applications were refused outright by the authority.
One of the biggest challenges noted by the FCA is the poor quality of submissions. They have rejected applications lacking critical elements required for an assessment, especially concerning security and anti-fraud measures. The FCA wants these rejections to serve as lessons for future applicants, stressing that all crypto firms, whether based in the UK or abroad, must be well-versed in UK laws if they intend to operate in the region.
What This Means for Crypto Firms
The FCA’s stringent approach sends a strong message: the UK is committed to regulating crypto assets and making the market safer for consumers. Firms hoping to operate in the UK must not only implement anti-money laundering measures but also ensure they comply with broader financial promotion rules. This will be crucial after October 8, 2023, when the FCA’s new financial promotion rules come into effect. These rules are designed to ensure crypto promotions meet the same high standards as other financial sectors, protecting consumers from misleading or fraudulent advertisements.
As more young adults in the UK invest in cryptocurrencies, the National Health Service (NHS) has raised concerns about crypto trading addiction. With around 23.9 million crypto holders expected in the UK by 2025, the rise in addiction cases has become a pressing public health issue.
A Global Trend in Crypto Regulation
The UK isn’t alone in intensifying its scrutiny of crypto firms. Countries like India have also mandated crypto companies to comply with strict anti-money laundering (AML) guidelines. In India, firms must register with the Financial Intelligence Unit and adhere to Know Your Customer (KYC) regulations. The global crypto space is evolving quickly, and governments are working hard to ensure these new-age financial assets aren’t exploited by criminals or terrorists.
Crypto firms, no matter where they operate, face a challenging but essential task: bolstering their security frameworks to comply with growing regulatory demands. The future of crypto in the UK—and beyond—will depend heavily on how well firms adapt to these stringent rules.
