With a key regulatory deadline fast approaching, many firms marketing crypto services to UK customers could be forced to wind down operations. Companies currently listed on the FCA’s temporary register must obtain full authorization by March 31st. Multi-billion-dollar fintech, Revolut, is among the high-profile names yet to secure a full license.
The New Rules Explained
The Financial Conduct Authority has been allowing crypto firms, including trading brokers, to operate in the UK through a temporary register while they obtained full authorization. And while the financial watchdog extended the deadline to register for a full license by a year, many firms are either withdrawing their applications or look set to miss the March cut-off.
The FCA is responsible for overseeing the digital currency space, including tackling Anti-Money Laundering (AML). The new regulations were designed to ensure companies have sufficient AML protocols in place, but many brands are withdrawing their applications, unable to meet the latest standards.
With only days to go until the March deadline, the future of several recognizable brands in Britain remains uncertain. This includes financial technology firm, Revolut, worth approximately $33 billion. Emerging start-up, Copper, with ties to UK Finance Minister Philip Hammond, is also yet to receive full authorization.
‘A Total Disaster’
But whilst the regulator’s intentions may be honourable, many insiders aren’t happy with the implementation of the new rules. One solicitor advising cryptocurrency firms said the FCA had been slow to approve applications and is often unresponsive.
A spokesperson for the regulator said it had approved only 33 applications so far with over 80% of the companies it had assessed either withdrawing their applications or facing rejection.
The spokesperson added: “We’ve seen a high number of the crypto-asset businesses applying for registration not meeting standards there to help ensure firms are not used to transfer and or disguise criminal funds.” They added: “Firms that do not meet the expected benchmark can withdraw their application. Firms that decide not to withdraw have the right to appeal our decision to refuse, including through the courts.”
Is The UK Risking Its Place On The Global Crypto Stage?
Some critics are concerned that the regulatory direction of travel is driving cryptocurrency firms away from Britain. And in doing so, brands may take their investment and taxable revenue with them. The UK is already at risk of falling behind the US and European Union, with EU legislators recently voting against a proposal that would have prevented Bitcoin mining in the region.
The danger is that while the top brass in some countries recognize the potential opportunities that digital currencies and associated firms offer, the UK is focussing on the risks, and in turn, introducing obstacles rather than opening doors. This also comes at a time when the UK is trying to secure its position as a global leader in financial innovation.
Now, it’s probably too soon to understand the true ramifications of the latest regulatory-driven evacuation of UK crypto firms. However, retail investors may soon have to wave goodbye to familiar brands like Revolut.
On a more positive note, both Coinbase and PayPal, which offer crypto services in the UK, will continue to operate in the region.