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The UK Financial Conduct Authority (FCA) has faced significant challenges in approving crypto business registrations, with a recent report highlighting that only four out of 35 applications were accepted over the past year. This high rejection rate is largely attributed to concerns about inadequate money laundering and fraud protection measures.
According to the FCA's annual report for 2024, more than 87% of crypto registration applications were either withdrawn, rejected, or refused due to insufficient anti-money laundering controls. Specifically, 15 applications were withdrawn and nine were rejected with the remaining four being the only ones to meet the regulator’s standards. The FCA emphasized that many submissions either lacked essential components required for assessment or were deemed invalid due to poor quality of key elements.
In response to these issues, the FCA implemented a new “financial promotion perimeter” for {crypto} advertising in June 2023. This measure aims to ensure that cryptocurrency advertisements are clear, fair, and not misleading. Additionally, public awareness of crypto-related scams has increased, with 63% of UK consumers contacting authorities about scams before proceeding with any projects, up from 58% in 2023.
For crypto firms facing difficulties with UK regulations, there are indications that some may seek registration opportunities outside the UK. International law firm Reed Smith highlighted that the FCA has experienced lengthy processing times for crypto applications, averaging 459 days over the past three years. During this period, the FCA has invested a significant amount of resources into reviewing these applications, with 186 applications being withdrawn in the last three years.
Reed Smith’s partner Brett Hillis noted that the prolonged wait times and perceived lack of political will to expedite the registration process could impact London's competitiveness in the global crypto sector. This situation suggests that crypto firms may increasingly look beyond the UK for more efficient regulatory environments.
