A novelty Bitcoin token photographed on a £10 note.
Matt Cardy | fake images
LONDON – A host of crypto firms could be forced to close their businesses in the UK if they fail to register with the financial watchdog by a key deadline next week.
As of March 31, companies operating crypto services in Britain must register with the Financial Conduct Authority, which is tasked with overseeing how digital asset companies combat money laundering.
Last year, the regulator extended the time frame allowing companies on temporary registration to continue operating while seeking full authorization; It will be closed once the term passes. The FCA said that many crypto firms had withdrawn their applications because they did not meet required anti-money laundering standards.
Now, with just days to go until the new deadline expires, the fate of companies on the temporary register, including $33 billion fintech firm Revolut and Copper, a crypto startup that boasts the UK's former finance minister Kingdom, Philip Hammond, as adviser, is pending. the balance.
'A total disaster'
Many industry insiders have expressed frustration with the FCA's handling of the crypto registry.
A lawyer advising crypto businesses on their applications said the regulator had been slow to approve applications and often unresponsive, a sentiment echoed by other industry figures.
"The process has been a total disaster from the FCA's point of view," the lawyer told CNBC, speaking on condition of anonymity due to the sensitive nature of the matter.
An FCA spokesperson said that it has so far only approved applications from 33 crypto firms. More than 80% of the companies it has evaluated to date have either withdrawn their applications or been rejected.
“We have seen a large number of crypto asset companies apply for registration and fail to meet the standards there to help ensure the companies are not used to transfer or disguise criminal funds,” the spokesperson said.
"Companies that do not meet the expected benchmark can withdraw their application. Companies that choose not to withdraw have the right to appeal our decision to reject, including in court."
why does it matter
Gemini, the cryptocurrency exchange operated by Tyler and Cameron Winklevoss, was one of the first companies to gain FCA approval.
Blair Halliday, UK director of Gemini, said the licensing regime was important as it gave clients the assurance that they were dealing with a company that had undergone rigorous scrutiny.
“Getting a crypto asset registry was a critical step for crypto in this country,” Halliday told CNBC. "He gave companies that really have that desire to seek regulatory approvals something to demonstrate as a key differentiator."
Lavan Thasarathakumar of the crypto industry association Global Digital Finance said there has been "a lot of frustration" over the process.
“Fundamentally, it has been too slow,” Thasarathakumar said, adding that the FCA has been dealing with a “huge backlog” of applications for registration.
And some companies are still withdrawing their applications.
That includes B2C2, the London-based crypto trading firm, which recently withdrew from temporary FCA registration. Since Monday, all B2C2 spot trading activity has moved to the company's US entity. The firm said its derivatives business is not affected as it is run by an FCA-licensed subsidiary.
“We are committed to ensuring this move causes as little disruption as possible and we are working closely with our customers to ensure they continue to have a seamless trading experience with us,” a B2C2 spokeswoman told CNBC via Telegram.
Companies whose applications have been rejected by the FCA can appeal, but the process is lengthy and may need to go through the courts.
A court recently sided with the FCA's decision to reject an application from cryptocurrency exchange Gidiplus.
Brexit dividend?
Mauricio Magaldi, director of global strategy for crypto at fintech consultancy 11:FS, said the UK's current regulatory direction puts the country at risk of falling behind the US, European Union and other regions.
President Joe Biden has signed an executive order calling for government coordination on digital currency oversight, while EU lawmakers recently rejected a proposal that would have effectively banned bitcoin mining on the block.
"While the major jurisdictions spot opportunity and risk, the UK emphasizes risk," Magaldi told CNBC. “By moving too fast and too narrow, the rules and timelines create hurdles for crypto businesses that could crowd them out of the UK market.”
Industry representatives fear this could put the UK at a disadvantage at a time when it is vying to be a world leader in financial innovation after Brexit. The country is home to a thriving fintech industry, attracting nearly $12 billion in investment last year.
But fast-growing fintechs like Revolut and Copper may soon be forced to scale back their crypto activities in Britain and move abroad if they fail to get into full registration. Both companies declined to comment when contacted by CNBC.
Companies like PayPal and base of coinswhich sells crypto services in the UK through subsidiaries abroad, will not be affected.
