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UK’s financial regulator says it has approved only 13% of the total applications by cryptocurrency companies for registration with the body.
The Financial Conduct Authority (FCA) has disclosed that from January 2020, only 38 applications have scaled through out of 291 since it started the new registration process.
The recent statistics come as the FCA published its response to an anonymous right-to-know request about the status of its registration process so far.
The financial watchdog explained that although it has only approved 38 out of 291 applications, a majority of firms voluntarily withdrew their filings as the body encourages resubmissions if all requirements are not met at the time of filing.
“Firms are required to provide the minimum information set out under regulation 57 of the MLRs, any firm that has not provided the required information will have their application rejected.”
The body further noted that it refused 5 applications due to non-compliance of the firm with the Money Laundering, Terrorist Financing, and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs).
An additional 22 applications were rejected based on their failure to update the FCA with the provisions of Regulation 57 of the MLR.
The reasons cited by the body ranged from lack of complete requirements to voluntary withdrawals. It is worth noting that the FCA’s registration process has come under scrutiny from observers with many describing it as “too harsh” amid a wider regulatory crackdown.
FCA’s tough process may lead to an exodus
While the financial regulator seeks to establish a strict regulatory regime to protect investors amid the growing rate of digital asset scams, the whole process has left certain companies at a disadvantage.
Philip Hammond, the chairman of digital asset exchange Copper blames the regulator rather than the companies as he bemoaned the FCA’s slow registration processes.
As a result of the complex process, Copper withdrew its application and is now registered in Switzerland, a move many believe will leave the UK trailing other jurisdictions springing into crypto hubs.
UK Prime Minister Rishi Sunak has called for the country to embrace technologies like the blockchain but the government’s rulemaking process leaves investors at crossroads.
While some advocate strict rules, others have criticized the bottleneck regulations including the recent planned ban on crypto incentives by the FCA, a move that would limit cryptocurrency advertising and promotions.
Digital asset lobby group, CryptoUK lamented the position of the FCA adding that it could drive investment out of the country.
“Whilst members acknowledge that the rules have been extended to the crypto asset industry to minimize consumer detriment, the FCA should keep in mind that certain aspects of the rules (such as incentive bans) may make it challenging for firms to be commercial and competitive and may cause the unintended consequence of forcing firms to move their operations out of the U.K.”
This month, a survey revealed that about 75% of participants struggled with the FCA registrations further confirming an issue raised by crypto executives.