FCA doubles down on hawkish crypto stance to fight money laundering

The U.K. Financial Conduct Authority (FCA) is standing firm on its stringent crypto firm registration process, despite concerns that its tough regulatory standards might stifle innovation within the industry.

In a blog post on Oct. 21, Val Smith, head of payments and digital assets at the FCA, reaffirmed the authority’s position, asserting that the FCA’s experts “never turn applications down out of hand.”

Smith emphasized that setting and maintaining high standards that people can trust is essential for fostering a thriving and competitive market. She explained that this approach applies not only to crypto firms but also to all businesses seeking FCA registration.

“We know that setting and maintaining standards people can trust is a key part of any thriving, competitive sector. That’s why we hold all firms seeking registration, not just crypto firms, to strong and universal standards,” she said.

Smith addressed concerns over potential illicit activities, including terrorism, organized crime, and human trafficking. She cautioned against relaxing regulatory standards, arguing that doing so could lead to a “race to the bottom” in terms of regulatory practices.

In her explanation of the FCA’s evaluation process, Smith noted that the regulator looks beyond a firm’s internal controls and systems. The FCA also examines the environment in which the firm operates, the people managing it, and the type of customers it aims to serve.

“Our decision on whether to register isn’t just based on the controls and systems firms have in place. We look at the environment they operate in, the people involved in these processes and the customers they want to reach,” Smith added.

This statement comes several months after the FCA’s annual report revealed that, out of 35 crypto applications received for registration during the year ending March, only four firms were approved. This statistic highlights that over 87% of registration attempts were either rejected, withdrawn, or denied, underscoring the significant hurdles facing new entrants in the U.K. crypto market.