UK Regulator Issues Fresh Warning to Crypto Firms amid Key Deadline Approaches
Nicholas Otieno Mar 25, 2022 10:15
FCA issued a release with an even more direct message notifying crypto firms that they must bring their operations into compliance within the law or face potential regulatory action.
The Financial Conduct Authority (FCA), a financial regulatory body in the United Kingdom, has issued a fresh warning to crypto firms. The regulator issued a mildly worded statement on Thursday informing crypto companies to be clear and honest with their customers when selling crypto assets, taking into account custody and prudential considerations and assessment of risks related to financial crime.
The statement comes amid confusion about the future of multiple high-profile crypto providers in Britain. Many cryptocurrency firms could be forced to shut down their businesses in the U.K. if they fail to register with the finance regulator ahead of a key deadline next week. From March 31, companies operating crypto services in the UK must be registered with the FCA.
Last year, the financial watchdog extended the deadline allowing companies on a temporary register to continue trading while they seek full authorization. The extended period is coming to an end. Now, with just a few days to go until the new deadline elapses, the fate of companies on the temporary register — including $33 billion fintech firm Revolut and Copper.co, a cryptocurrency trading firm that signed former U.K. Finance Minister Philip Hammond as an advisor – hangs in the balance.
Many industry participants have expressed frustration regarding the manner in which FCA is handling the crypto registration.
One lawyer advising crypto firms on their applications mentioned that the watchdog was often unresponsive and had been slow to approve applications. The statement has also been quoted by other players in the sector.
An FCA spokesperson disclosed that so far, the regulator has approved just 33 crypto firms’ applications. Over 80% of the companies that the watchdog has assessed to date have either withdrawn their applications or been rejected. And some firms are still withdrawing their applications.
Companies that have had their applications rejected by the regulator can appeal, but the process is quite long and could even go through the courts’ interventions.
Many rapidly growing fintech firms such as Copper.co and Revolut may soon be forced to wind down their crypto trading activities in the UK and move overseas if they don’t make it onto the full register.
Continued Actions on Crypto Activities
The FCA has repeatedly made clear that it will continue taking action where needed in the UK crypto-asset landscape. Consumers and companies should remain alert to risks associated with crypto assets as the FCA’s activity and expertise in this area continue to develop.
In January, the watchdog announced new measures aimed to clamp down on risk-free crypto advertising. The regulator launched such efforts to protect consumers from investing in high-risk products where they are unaware of the risks.
As part of the proposals, companies selling and enabling the trading of cryptocurrencies, would be required to issue a warning on each advert that the consumer is putting their funds at risk. Furthermore, any prospective promotion or advertisement would also have to be approved by an existing FCA-regulated firm as being fair, clear, and not misleading.
Last week, the regulator opened a search for someone to head its crypto division. The financial watchdog is currently seeking to hire an expert to head its digital assets department and build a new team. The department head is expected to lead the FCA’s regulatory activities into crypto companies that may be involved in frauds and scams.
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