On Friday, the UK Financial Conduct Authority (FCA) revealed that only 41 crypto firms had passed its regulatory approval scrutiny out of 300 applicants. The 300 companies in the UK had tendered applications as part of an ongoing process towards regulating and standardizing the fledging financial sector.
Director of Markets for the FCA, Sarah Pritchard, described the findings as worrisome, adding that it had referred a significant number of defaulters who “lacked appropriate knowledge, skills and experience to carry out allocated roles and control risks effectively” to law enforcement agencies for possible financial violations. Following the report, MPs described the spate of crypto in the nation as akin to “the wild west.”
Whilst failing to explain such a high shortfall, the FCA rather left hints of 14% success. It stated in its report that these companies were explicit on their business model, the responsibilities and authority of internal and external stakeholders, liquidity source, management models, policy outlines, security and risk strategy, underlying technology and the flow of funds. Another reason for disqualification was the use of the application by some crypto companies for advertising. At the same time, an examination is still ongoing, thereby misleading unsuspecting customers with the appearance of government approval.
Some crypto companies approved in the UK are Revolut, eToro, GlobalBlock, Wintermute, and CEX.io, amongst others.
The UK government, back in 2020, had empowered the FCA to clamp down on corrupt financial practices and mendacious advertising after it discovered a growing number of crypto users (2.6 million at that time) had little idea about underworkings or risks inherent in the space. Since the clampdown, the use of crypto for payments in major cities has witnessed a steady decline compared to its European counterparts. Insights from Solaris found that London trailed behind Paris, Madrid, Berlin, and Sofia as the top five European cities making payments in crypto to the tune of £22 million, £16.8 million, £16.6 million, £13.8 million and £7.5 million respectively.
In light of the government’s claim to make the UK a globally-competitive crypto hub, the FCA’s strict clampdown, many believe, may send hawkish signals across the crypto space. Headed by Ashley Alder — who once described crypto platforms as “deliberately evasive” with a need to be “regulated further” — the FCA has moved in full swing to utilize all the powers bestowed upon by congress for a comprehensive crypto oversight.