Only 4 out of 35 Crypto Companies Gain UK FCA Approval in Past Year

TLDR:

• The UK’s Financial Conduct Authority (FCA) rejected over 87% of crypto registration applications in the last fiscal year.
• Only 4 out of 35 applications were approved between March 2023 and March 2024.
• Since January 2020, the FCA has approved just 47 out of 359 total applications.
• Many firms are withdrawing applications or looking to operate from abroad due to the challenging process.
• The high rejection rate is mainly due to weak anti-money laundering (AML) controls.

The United Kingdom’s Financial Conduct Authority (FCA) has maintained a strict stance on cryptocurrency regulations, as evidenced by its high rejection rate of registration applications.

In the fiscal year ending March 31, 2024, the FCA approved only four out of 35 applications from crypto companies seeking registration under the UK’s anti-money laundering (AML) framework.

This 87% rejection rate highlights the significant challenges crypto firms face in meeting the UK’s stringent regulatory requirements.

Since January 2020, when the FCA took on the responsibility of overseeing the UK’s crypto asset sector, it has received a total of 359 applications. Of these, only 47 firms have successfully registered so far.

The FCA’s annual report revealed that the majority of applicants either withdrew their requests, were outright rejected, or had key components missing from their submissions. The regulator cited weak money laundering controls as the primary reason for the high failure rate.

Among the few successful applicants were BNXA (Binance’s payment partner), a PayPal UK unit, and Komainu, a joint venture involving Nomura for crypto custody services. These approvals demonstrate that meeting the FCA’s standards is possible, albeit challenging.

The stringent registration process has reportedly prompted some crypto companies to explore opportunities outside the UK. Many firms are now seeking approval in other jurisdictions while continuing to serve UK-based customers from abroad.

This trend has been further influenced by the Labour government’s recent pause on additional crypto-related legislation, creating an uncertain regulatory landscape.

The FCA has maintained that it provides clear guidance on what constitutes good and poor practice. However, many crypto companies still find it difficult to navigate the UK’s regulatory framework.

Long wait times and a perceived lack of feedback from the FCA have contributed to growing frustration among applicants.

Data obtained through Freedom of Information requests shows a decline in the number of applications for registration as crypto-asset exchanges or custodian wallet providers.

Applications to the FCA have dropped by 51% over the past three years, from 59 two years ago to 42 in the previous year, and now down to 29 in the most recent period.

The FCA’s focus on registering firms under anti-money laundering rules is part of a broader regulatory approach.

The regulator is currently awaiting legislation that would grant it full authorization powers over crypto companies operating in the country. However, this expanded authority may be delayed following the new government’s decision to pause crypto plans.

In addition to AML concerns, the FCA has also taken steps to regulate crypto advertising. In June 2023, the regulator finalized a new “financial promotion perimeter” for crypto advertising to ensure that ads in the UK are clear, fair, and not misleading.

Despite the challenges, there are some positive signs. The FCA noted that the general public in the UK had become more aware of potential crypto scams, with 63% of consumers who called about a scam doing so before they invested in the project, a 5% increase from the previous year.