The UK's Financial Conduct Authority (FCA) has defended its “too tough” approach to registering cryptocurrency firms, arguing that robust standards are essential for building a sustainable and trustworthy digital asset sector.
In a statement released today (Monday), Val Smith, Head of Payments and Digital Assets at the FCA's authorizations division, addressed criticism that the regulator's stringent requirements could potentially stifle innovation in the crypto industry and that the bar for registration is set “too high.”
Crypto Companies Want to Build on Sand. FCA Wants to Build on “Sturdy Foundations”
"Innovations built quickly on unsafe, unregulated and untrusted foundations become a house built on sand – likely to collapse," Smith warned. "Instead, we want to closely collaborate with partners across government, industry and other jurisdictions to develop a crypto sector that's built on reliable, sturdy foundations."
The FCA has faced scrutiny over the relatively low number of crypto firms it has registered under the UK's Money Laundering Regulations (MLRs). Some industry observers have suggested the regulator's standards may be too high, potentially jeopardizing the UK's position as a global financial leader.
Smith pushed back against these claims, emphasizing that the FCA never dismisses applications outright and takes the risk of financial crime seriously. "Allowing illicit money to flow freely can destroy lives," she stated, citing concerns about terrorism, organized crime, sanctions evasion, and human trafficking.
It is undeniable, however, that the FCA takes a strict approach to regulating the industry. Since 2020, the watchdog has received around 360 registration applications, approving barely 50 of them. The full list of registered cryptoasset firms is available on the institution’s website. In 2024, only three entities were added to the list.
In September, Finance Magnates reported that nearly 9 out of 10 crypto registration applications failed to meet AML standards. On the other hand, the FCA has been effective in tracking dishonest firms in the sector. According to an August report, the institution issued 1,000 warnings and removed 48 potentially suspicious applications since October of last year.
FCA “Actively Wants to Work with You”
The regulator stressed its commitment to working with crypto firms throughout the application process, offering pre-application meetings and practical support. Smith acknowledged that the crypto industry is still developing and that adapting to new regulatory processes can be challenging.
"We actively want to work with you," Smith said, encouraging firms to engage with the FCA early and utilize the available resources.
While the number of registered crypto firms remains a topic of interest, Smith insisted that the FCA's focus must remain on protecting consumers and maintaining the integrity of the financial system. She argued that upholding high regulatory standards is crucial for creating a "healthy, globally competitive and vibrant crypto sector in the UK."
Another issue is the number of people employed by the FCA in the cryptocurrency sector. According to Quant, the UK may face a "crypto catastrophe" due to staff shortages. In an email sent to Finance Magnates, a spokesperson for the regulator answered to these allegations, stating, "Crypto is an area of work that spans the entire FCA, and our increased staffing levels reflect our investment in these priorities."
This article was written by Damian Chmiel at www.financemagnates.com.
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