Arslan Butt
The Financial Conduct Authority (FCA), an organization in the UK that regulates businesses that offer services for digital assets, sent written evidence to the UK Treasury Committee on January 19. The UK Treasury Committee has been looking into the digital asset market for a while now. According to the FCA, 85% of UK companies requesting registration of digital assets did not adhere to minimum AML requirements.
***Just In***-85% of #crypto firms who attempt to register with a UK financial regulator are denied There are only 41 companies listed on the FCA’s cryptoasset firm registry, according to the agency — or about 15% of applicants. #Bitcoin
— Crypto Macro (@cryptomacro14) January 29, 2023
Understanding The High Rejection Rate Of FCA: What You Need To Know
On December 7, the FCA testified before the committee and promised in writing to address some of the committee’s concerns. The committee has now issued a written follow-up. According to FCA reports, only 5% of companies that applied for FCA authorization were approved on the first attempt.
It also revealed that 85% of applicants were turned down because they did not meet the bare minimum of anti-money laundering and anti-terrorist funding requirements.
The FCA Issues Stringent Guidelines for Cryptoasset Applications Amid High Rejection Rate https://t.co/Kn7OEL3S3F #Innovation #regtech
— Eugene Nilson (@nilson_eugene) January 28, 2023
As part of the registration process, FCA discovered flaws in critical controls such as customer investigative work, risk assessments, transactions, active monitoring, accountability, and management information, according to the report.
Many times, key personnel failed to provide proof that they met the registration requirements because they lacked the necessary knowledge, abilities, and experience. Some businesses that are deregistered will resubmit their applications if they believe they can meet FCA criteria.
When the FCA discovered suspected financial criminality or direct connections to criminal organizations, it referred them to law enforcement. Some of the ongoing investigations are still in progress.
The FCA took a tough stance during authorization, lowering the risk of crime significantly, which explains the high rejection rate.
US Government vs. UK Government: The Crypto Debate Over Who Gets To Make the Rules
The United Kingdom rejects crypto businesses that the United States allows to operate. In recent months, cryptocurrency companies with US operations, such as Wirex and B2C2, have withdrawn their applications to register with the FCA.
The FCA, Britain’s financial regulator, had rejected over 265 applications from companies dealing in crypto assets as of January 2023, with 74% being rejected directly or withdrawn and 11% being rejected after consideration.
According to Sarah Pritchard, an FCA executive, the companies that were rejected from competing for the regulator’s authorization were unable to demonstrate that they met the necessary, minimal requirements. She also stated that they maintain close contact with US regulators in order to learn broad lessons from FTX’s demise.
UK Investors Left Reeling After Shock Collapse of FTX
The FCA was also questioned about FTX’s demise and how it affected UK investors. The Authority, according to the submission, has little control over investor exposure to FTX. Sarah Pritchard claimed in a recent letter that FTX was not authorized, licensed, or registered by the FCA.
However, according to public records from the bankruptcy case, the FCA did state that the UK accounted for 8% of the FTX group’s global client base. As a result, an estimated 80,000 of FTX’s million creditors are UK investors.
Furthermore, the FCA publicly warned citizens in September 2022 about FTX’s provision of services to UK consumers without FCA approval. Clients would not be covered by the Financial Services Compensation Scheme or have access to the Financial Ombudsman Service if they lost money, according to the notice.
Related news:
- Here’s What UK Crypto Firms Need to do to Win Regulatory Approval, Says the FCA
- Crypto is far From Dead, And That’s Why the UK Still Wants to Be a Global Crypto Hub, Says Government
- 15 Best Crypto Exchanges in the UK 2023
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This article was written for Business 2 Community by Arslan Butt.
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