Crypto firms face critical deadline in the UK

Crypto firms in the United Kingdom could be forced to cease operation by next week as the deadline for registration with a foremost financial regulator in the country looms.

UK crypto companies have March 31 deadline

According to a CNBC report, the Financial Conduct Authority (FCA), in new efforts to combat crypto crimes in the country, has set a March 31 deadline for companies offering crypto services to register. 

The regulator had earlier extended the deadline by allowing firms on the temporary register to continue operating in the country even as they apply for full authorization. However, only 33 applications, including Gemini, have been approved. 

On the other hand, crypto firms like Revolut and Copper, who are on the temporary register, have failed to meet the requirements for full authorization, leading to the withdrawal or the rejection of their applications.

Now, they have only a few days to meet the anti-money laundering standards, or they may be unable to operate in the country again. 

CryptoSlate spoke with Jeff Hancock, CEO of Coinpass, who has experienced firsthand the trials and tribulations to ensure his UK-based exchange is compliant with the FCA’s governance. Handcock commented: 

“The FCA process towards complying crypto-asset businesses was a blurry line and very tough to cross. Not all companies were being measured to the same standards depending on their size, complexity, tokens on offer, business models and how they addressed client risk and appropriateness. Whilst we agree that compliance is important, we’re being asked to judge our client’s appropriateness to trade crypto without proper frameworks and guidance. It’s like being asked to walk through a minefield and reporting back in with a missing limb.”

FCA’s lethargy affecting registrations

While the FCA is committed to upholding high standards for crypto companies in the country, many question how the agency has managed the registrations. 

Some have said that the regulator’s lethargy in handling the applications played a part in the current situation.

Speaking on the slow pace at which the registration was being handled, Lavan Thasarathakumar of Global Digital Finance stated that the regulator was handling a backlog of applications before adding that the process had also been “really frustrating.”

Handcock provides insights on the endeavor: 

“The process also diverged from Know Your Customer (KYC)  and Anti-Money Laundering (AML) by asking for business cases and continuity plans regarding our team size, marketing, margin compression and future lines of business. The process was long, frustrating and at the end of the day, will do little to protect investors in the U.K. while offshore exchanges proceed to do as they please, whilst hampering UK Fintech and Crypto innovation.”

According to one FCA spokesperson for the FCA, some of the firms applying for the registrations do not meet the required standards that could help them identify illicit funds.

He added that firms whose applications have been rejected could appeal the decisions through the regulator or by going to court.

What this means for the industry in the UK

While the crypto industry is one of the fastest-growing spaces in the world, the advent of the new registration criteria by the FCA could affect the space as companies unable to complete their registrations may be forced to move their operations offshore.

Mauricio Magaldi of 11:FS believes that the UK’s crypto industry risks falling behind its peers in the US and Europe if the regulator were to continue with its current regulator’s stance.

According to Magaldi, the FCA “rules and timeframes create hurdles to crypto firms that could potentially displace them from the U.K. market” while also adding that the regulator was also focusing on the risks in the space instead of identifying the opportunities too.