Despite plans to turn the region into a bustling crypto hub, the UK’s financial watchdog says it has only greenlighted 41 out of 300 applications from crypto firms seeking approval regulations to date.
The UK’s Financial Conduct Authority (FCA) implemented the new cryptocurrency-focused regulations on January 10, 2020, to oversee companies operating in the sector and ensure they face the same fight. Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) regulations as businesses in traditional financial markets.
A statement of the FCA revealed that of the 265 applications that were “determined”, only 15% of these applications were approved and registered, 74% of the companies refused or withdrew their application, while 11% were rejected. Another 35 claims have yet to be determined.
Although the FCA did not expressly state the cause of rejected or withdrawn applications, it did provide information on “good and poor quality” applications.
Among the most comprehensive requests were a detailed description of the company’s business model, roles and responsibilities of business partners and service providers, sources of liquidity, cash flow charts, and an overview of policies and systems in place to manage risk, the report says.
Incomplete applications were more apparent when companies used the app to promote their products and services, especially in cases where the application process was still ongoing:
“Applicant websites and marketing materials must not include language that creates the impression that applying for registration is a form of FCA endorsement or recommendation.”
The report suggests that some companies may have had their apps taken down if they couldn’t show they had enough blockchain compliance resources in place to monitor on-chain transactions.
The FCA has also doubled down on its stance against money laundering, requiring all companies to appoint a money laundering reporting officer who is “fully involved” in the application process.
The FCA also pointed out that even for companies whose registrations have been approved, such approval does not mean that they are no longer exempt from obligations:
“Applicants should acknowledge that registration is not a one-time formality or a tick-box exercise without any further obligation or interaction with the FCA.”
“These comments should assist applicants in preparing their application for registration and help make the process as simple and efficient as possible,” the note summarizes.
As many companies provide international services, the UK FCA has also confirmed that they are now collaboration with other public bodies around the world — including the US Securities Regulator and the US Commodities Regulator — to strengthen regulation where necessary.
The FCA has repeatedly pointed out that failure to register before doing business may result in criminal charges.