The UK’s Financial Conduct Authority (FCA) defended its decision on crypto regulations, as criticism in the market rose.
The FCA said that such measures are essential to preserve financial system integrity. FCA head of payments and digital assets Val Smith clarified the regulator’s stance about its high rejection rate of crypto firm applications. This happened via a letter dated Monday, October 21.
‘Maintaining high standards is crucial to any competitive financial sector,’ said Smith. However, she said the FCA does not refuse applications arbitrarily but insists that firms meet rigorous requirements.
In addition, Smith cautioned that relaxing these standards will harm the safety of the financial market and harmful regulatory lapses.
FCA Upholds Strict Standards for Crypto Firms
Last year, the FCA revealed that only 13% of the past year’s crypto company applications were approved. 87% of the 35 applications reviewed were rejected, withdrawn, or denied. It is an indicator that the regulator’s high standard that is difficult for some firms to achieve.
The FCA makes crypto firms jump through the same hoops as traditional financial institutions despite them providing crypto firms with pre-application meetings and ongoing support.
Smith explained that the regulator reviews a company’s internal controls, operating environment, and leadership. As you can imagine, these strict measures must be implemented because crypto is risky. FCA works with government bodies, industry leaders, and international regulators in the UK. Their aim is to build a safe landscape for crypto’s operation.
Some in the crypto industry have criticized the regulator for demanding too high standards. Firms claim that such reglations stifle innovation and growth.
Yet, since the FCA is so clear it is unwilling to relax its controls, it defends its stance with those risks, such as terrorism financing and organized crime, to which it says the sector is vulnerable. Smith refused to consider scaling back registration standards to avoid a ‘regulatory race to the bottom.’
FCA Targets Illegal Crypto ATMs in UK
The FCA has a strict registration process and is actively clamping down on the operations of illegal crypto ATMs. On September 10, the FCA charged London resident Olumide Osunkoya with turning his back on the registration and unlawfully operating crypto ATMs. This is the first in the UK to show that the FCA is serious about tackling unregulated crypto activities.
In March this year, the FCA investigated and visited several locations, including Exeter and Sheffield, in its hunt for illegal crypto ATMs. These were part of the regulator’s all-out strategies against money laundering and other criminal activities associated with the crypto space. The FCA is reviewing the evidence gathered from these operations and has said further action may be taken.
This is not the first time the FCA has pushed for a proactive stance on registration requirements and commitment to enforcement as it wants to protect the financial system against abuse.
The regulator’s main objective is to keep a close eye on things and stop illegal activities while preserving a secure environment for crypto businesses. As the FCA works with government and industry to build stronger regulations around digital assets, they maintain business dialogue.
