The UK’s Financial Conduct Authority (FCA) has become a source of growing concern among crypto firms operating in the country. A recent survey conducted by SmartSearch has shed light on the industry’s wariness of the FCA and its complex regulatory framework. With over a quarter of respondents questioning the FCA’s involvement in crypto products and three-quarters facing challenges with FCA registration, the crypto industry’s relationship with the regulator is under scrutiny. This article explores the FCA’s recent crackdown on UK crypto ATMs, the compliance burden on smaller firms, and the government’s ambition to position the UK as a crypto hub.
Challenges with FCA Compliance:
The survey conducted by Censuswide between May 26 and July 2, 2023, involved 500 industry compliance decision-makers. The findings revealed that many crypto firms are struggling with the FCA’s regulatory requirements. Over 25% of respondents expressed reservations about the FCA’s involvement in the crypto sector, questioning whether the regulator truly understands the complexities of digital assets.
Furthermore, 75% of the participants reported facing challenges during their FCA registration process. These hurdles have led to 37% of firms seeking additional guidance to navigate the intricate compliance procedures imposed by the regulator. The burden of compliance, especially for smaller companies, has been a matter of concern within the industry.
The FCA’s Crackdown on UK Crypto ATMs:
One notable area of contention is the FCA’s stringent approach towards crypto ATMs in the UK. The regulator has authorized raids on multiple businesses hosting these machines, leading to a significant reduction in their number. Presently, only six crypto ATMs remain active in the country, with authorities linking them to money laundering activities.
The FCA’s Stand on Anti-Money Laundering and Counter-Terrorist Financing:
On January 26, the FCA revealed that a staggering 85% of crypto-asset firms had failed to meet its anti-money laundering and counter-terrorist financing standards. This revelation prompted Harriett Baldwin, MP and Chair of the Treasury Committee, to criticize parts of the industry as a “Wild West.” Such high failure rates have raised doubts about the FCA’s ability to effectively regulate the crypto sector.
Differing Views within the Industry:
While some sources have found their dealings with the FCA to be reasonable, others have expressed frustration with the regulator’s handling of crypto companies. Andrew Boyd, co-founder, and managing director at Finty, praised the FCA’s careful and methodical approach but acknowledged that it may pose challenges for smaller companies.
On Yavin, Co-Founder and CBO at Syndika, had a more critical view of the FCA, describing it as “horrible” for crypto companies. Yavin believes that the FCA lacks a comprehensive understanding of the crypto market, particularly decentralized finance (DeFi). This lack of expertise and the complicated regulatory process have led to delays in addressing crypto scams reported to the FCA.
The UK’s Ambition as a Crypto Hub:
Despite the concerns surrounding the FCA’s approach, the UK government, led by Prime Minister Rishi Sunak, has expressed ambitions to position the country as a leading crypto hub. On June 5, MPs sympathetic to the crypto industry called for the appointment of a “Crypto Tsar” to help achieve this goal. However, Andrew Griffith, economic secretary to the UK Treasury, stated on June 13 that there were no immediate plans to do so.
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Conclusion:
The relationship between the UK crypto industry and the Financial Conduct Authority appears to be complex and multifaceted. While some firms have found the FCA’s regulation to be methodical and measured, others have expressed concerns over its understanding of crypto and the compliance burden placed on smaller companies. As the FCA continues its campaign on various fronts, including its crackdown on crypto advertising and social media influencers, the crypto industry remains cautious about the regulator’s impact on its growth and innovation in the UK.
