As the UK seeks to become a leading hub for Web3 innovation, financial authorities are stepping up their efforts to protect the stability and security of the cryptocurrency sector. A recent report by the UK’s Financial Conduct Authority (FCA) revealed that 90 percent of recent applications for cryptocurrency firm registration have been rejected. Key reasons for these rejections include concerns about insufficient security measures, particularly in fraud prevention and anti-money laundering protocols.
The FCA report said the reviews are intended to help cryptocurrency businesses better prepare for the UK registration process.
According to the FCA, the UK received 359 applications to register crypto firms between January 2020 and September 1. Of these, only 47 firms (14 per cent) were successfully registered, while 40 firms (12 per cent) had their applications rejected. The vast majority – 240 firms (70 per cent) – withdrew their applications before a decision was made, with the remaining 13 firms (4 per cent) having their applications rejected outright by the FCA.
“We rejected applications that did not contain key elements necessary to conduct the assessment or where the poor quality of key elements rendered the application invalid,” the FCA noted.
This disclosure is intended to benefit current and potential crypto asset applicants, as well as consultants and trade associations involved in the sector. The UK Financial Services Authority has ordered all crypto companies wishing to register in the UK to be well-versed in anti-money laundering regulations.
“If any crypto asset firm, whether based in the UK or abroad, intends to commence sales to its customers in the UK from 8 October 2023, we would expect it to lawfully disclose its promotions in accordance with our financial promotion rules for crypto assets,” the FCA noted.
In July 2023, the cryptocurrency sector became a regulated financial sector in the UK. According to Statista, the number of cryptocurrency holders in the UK is expected to reach 23.9 million by 2025.
Following the rise in the number of young adults interested in the cryptocurrency sector in the UK, the National Health Service (NHS) recently issued a public health advisory labelling cryptocurrency trading addiction a public health issue.
The UK is not the only country to step up efforts to prevent terrorists and criminals from using cryptocurrencies – known for their fast and often untraceable transactions.
For example, India has mandated all cryptocurrency companies operating in India or looking to expand their operations to the country to register with the Financial Intelligence Unit, comply with the Prevention of Money Laundering Regulations (PMLA), and agree to collect KYC data of all their users.
