Crypto companies seeking to operate in the United Kingdom had until Thursday to get the Financial Conduct Authority’s clearance (FCA). Only 33 have cleared the regulator’s scrutiny so far.
After becoming the country’s anti-money laundering and counter-terrorist financing supervisor for the crypto business at the beginning of the year, the FCA announced a temporary scheme in December 2020; more than 100 firms sought registration.
The FCA muddled the outlook for the 13 remaining companies in the Temporary Registration Regime (TRR) on Wednesday, saying it was extending the March 31 deadline for “a small number of entities continuing to hold temporary registration is critically necessary.” The companies were not named, and the length of the extension was not specified.
Copper, a crypto services provider for institutions, Revolut, a fintech startup with a $33 billion valuation that enables cryptocurrency buying, and crypto exchange and digital wallet provider Blockchain.com, which is reputedly valued at $14 billion, are among those waiting for a decision.
Some have accused the FCA in the industry of having an unduly risk-averse approach to the approval procedure.
The FCA is “disqualifying registration on the basis of super small things,” according to the CEO of one firm set to withdraw its application, who spoke on the condition of anonymity to avoid upsetting the regulator. “They’re looking for the tiniest scratch and then invalidating the entire application.”
The critique is similar to that of Blockchain.com CEO Peter Smith, who slammed the FCA in a February interview with the British newspaper The Telegraph. Smith claimed that the agency was “not keen enough to stimulate innovation and collaborate with the industry.” As a result, he claims, the United Kingdom has “fallen behind.” Following a $300 million fundraising round in May, Blockchain.com was valued at $5.2 billion.
Firms that are regulated in different jurisdictions can rotate their operations to continue doing business in another country. Wirex, a crypto payments service, announced earlier this week that it had withdrawn its application and would instead serve U.K. customers through a subsidiary based in Croatia.
“They’re screwed, I suppose,” said the CEO of one of the companies planning to use an offshore jurisdiction, who asked to remain anonymous. “I know that several of these firms were in the midst of preparing for an IPO or significant funding talks when the FCA’s approach here, which is not meritocratic and rather subjective.”
Another option is to seek legal action, as Gidiplus, a bitcoin ATM operator, did in an attempt to overcome the FCA’s rejection of its application. According to the judge, the complaint was rejected because of a “lack of proof as to how Gidiplus would conduct its business in a generally compliant manner,”.
Should the FCA or the Treasury alter their minds, the legal approach is likely to put an end to any future possibility of a reconciliation.
The FCA, which is also in charge of crypto ad regulation, stated that it is attempting to meet its legal obligations.
“We’re continuing to register crypto firms to ensure they’re not used to launder money, and we’ve just opened a consultation on how crypto is marketed to consumers.