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- Twelve crypto firms on the FCA’s temporary register could be forced to move abroad in the face of the FCA registration deadline.
- Companies have decried the sluggishness of the FCA to respond to applications.
- The current situation is likely to have a backlash on the U.K. economy.
As things stand, about 12 crypto firms are on the brink of shutting down their operations in the U.K. and moving elsewhere. The Financial Conduct Authority (FCA) deadline to register crypto businesses draws closer, leaving companies’ future in its temporary register uncertain.
A Blockchain Brain Drain
The FCA had created a temporary registration structure for crypto companies in the U.K. as it moved to enforce stricter regulations on the crypto market. Companies on the list were to pursue full registration with the FCA or close down their business come Thursday. As per a Bloomberg report, there are currently 12 firms on the temporary registration scheme.
It has been noted that the FCA’s current Anti-Money Laundering (AML) regulations are lopsided against companies that operate in ways that promote decentralization and anonymity. As recently as last week, six firms withdrew from the temporary registration waitlist as the FCA informed them that they could not meet regulatory standards.
Another cause for concern has been the sluggishness of the FCA to respond to registration applications from crypto firms. A lawyer told CNBC that “The process has been a total disaster from the FCA’s side of things.” Reports have indicated that the FCA has remained ambiguous and sometimes unresponsive in its communication with crypto firms seeking to be compliant.
Some big names on the temporary register include crypto custody Copper and Revolut, a digital bank. With time running out, it is becoming less likely that these firms will be able to beat the deadline. Reports indicate that several of these firms, Copper included, are exploring setting up shop in friendlier economic climes like Switzerland.
A number of the 6 firms rejected last week have either started serving their clients in the U.K. through foreign subsidiaries or are about to do so. After withdrawing its FCA application, B2C2 stated its U.S. business handles all spot crypto asset trading. Wirex plans to service U.K. customers through its Croatian subsidiary Wirex Digital, according to a spokesperson.
While the FCA maintains that its goal is to protect consumers and prevent money laundering, there are concerns that the policies would adversely affect the U.K.’s economy. Aside from stifling the blockchain industry, capital markets expert Alex Wilkinson believes it would also hurt the country’s tax revenue.
“The consequences of their actions will have a significant detrimental effect on U.K. tax revenues and the FCA’s position as a premier regulator will continue to be eroded by more progressive regulatory regimes such as Singapore, Switzerland and Germany.”
Crypto regulation has become a major talking point in 2022 and will largely affect the outlook of the blockchain industry. Several pundits have urged governments to lean towards supporting innovation in creating regulatory frameworks. Currently, only 33 crypto companies have successfully been registered with the FCA.
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