The FCA explained its strict measures in licensing crypto firms as many have criticized it for stifling innovation.
The UK’s premier financial regulator, the Financial Conduct Authority (FCA), has defended its approach to vetting crypto applications. Many have complained of the regulator’s overly strict measures, accusing it of stifling digital asset innovation in the country. The FCA has issued a statement to explain its approach and how it is not acting to contain the UK’s crypto scene’s development.
The agency’s head of payments and digital assets of the authorizations division, Val Smith, mentioned, “Terrorism, organised crime, sanctions evasion and human trafficking are just some of the real-world issues we’re helping tackle by maintaining the standards the Money Laundering Regulations (MLRs) require.”
She said that the regulator never blindly turns down applications—it rather analyzes how likely crypto firms could be used to launder money. The FCA does not want to take it easy approving these businesses since it feels that the markets and the UK’s people would not be adequately protected.
“Innovations built quickly on unsafe, unregulated and untrusted foundations become a house built on sand – likely to collapse,” she added. “Instead, we want to closely collaborate with partners across government, industry and other jurisdictions to develop a crypto sector that’s built on reliable, sturdy foundations.”
However, she urged crypto firms to continue applying, encouraging them by assuring the FCA would be there to guide them with pre-application meetings and other practical support. “What we will do is support prospective firms to meet the required standards and only register firms that do,” Smith stated. “We’ll continue to weed out those that can cause harm.”
Crypto Firms Lose Interest in the UK, Regulator Introduces Blockchain Programs for Institutions
While Smith’s words indicate the FCA’s willingness to receive applications, crypto firms have expressed disinterest in even wanting to consider operating in the UK. A report stated that there has been a 51% decline in applications over the past three years. Only seven firms applied in the first quarter of 2024. The FCA’s Annual Report and Accounts for 2024 stated that it had either declined or witnessed firms withdraw over 87% of crypto applications over the past year.
Still, the FCA is instituting programs for crypto development. It recently partnered with the Bank of England to launch a sandbox for digital securities transacted over blockchain technology. The entities have teamed up to explore blockchain benefits to introduce quick and round-the-clock settlements while reducing fees. Financial institutions and enterprises could join the sandbox until March 2027.
