The UK’s Financial Conduct Authority (FCA) has rejected or withdrawn the vast majority of cryptocurrency business registrations in the past year, citing significant shortcomings in anti-money laundering (AML) and fraud controls.
Crypto Firms Struggle to Meet UK Regulatory Standards
According to the FCA’s 2024 annual report, 87% of crypto businesses that applied for registration failed to meet the required regulatory standards. Out of 35 applications submitted in the last 12 months, only 4 were approved. The remaining 31 applications were either rejected or withdrawn due to poor adherence to fraud protection measures and weak AML controls.
“Over 87% of crypto registrations were withdrawn, rejected, or refused for weak money laundering controls,” the FCA highlighted in its report. The regulatory body also pointed out that several submissions lacked the necessary components for proper evaluation or were of poor quality.
In a separate feedback statement, the FCA explained that some applications were invalid due to missing key details required for the assessment. Of the 35 total applications, 15 were voluntarily withdrawn, while 9 were formally rejected by the FCA.
New Rules for Crypto Advertising
In June 2023, the FCA introduced new rules aimed at tightening the regulation of crypto advertising in the UK. This “financial promotion perimeter” ensures that crypto advertisements are clear, fair, and not misleading, protecting consumers from potential risks associated with misleading promotional materials.
The FCA’s report also revealed a positive trend in consumer awareness. Around 63% of UK consumers who contacted the FCA about a crypto scam did so before making an investment, reflecting a 5% increase from the previous year.
Long Wait Times and Regulatory Challenges Push Crypto Firms Abroad
Many crypto businesses looking to operate in the UK have faced significant delays in the registration process. On August 30, 2024, international law firm Reed Smith warned that firms may start looking outside the UK due to the prolonged wait times and a lack of urgency from the FCA.
It currently takes an average of 459 days—over a year—for the FCA to process a crypto firm’s registration. Over the past three years, the regulatory body has collectively spent 25 years’ worth of manpower on evaluating applications. During this time, 186 applications were withdrawn, with many firms choosing to move their operations abroad instead of continuing to wait for approval.
“If applications are falling because crypto firms have essentially given up waiting and started looking abroad, this should send a clear warning about London’s competitiveness,” said Brett Hillis, a partner at Reed Smith.
