The UK’s Financial Conduct Authority (FCA) defended its strict regulatory environment for crypto firms in an October 21 blog post by Val Smith, the regulator’s head of payments and digital assets.
In his article, Smith noted that industry experts have claimed that the UK’s “approach could hold back innovation” and that it could also impact the country’s “position as a global financial leader “.
Why the FCA is strict on crypto
The FCA official defended the agency’s regulatory approach to the sector by emphasizing the importance of maintaining rigorous oversight, particularly to prevent crypto companies from facilitating money laundering.
She said:
“We never refuse applications out of hand. But we take the risk of companies being used for money laundering very seriously. Allowing illicit money to flow freely can destroy lives. Terrorism, organized crime, sanctions evasion and human trafficking are just some of the real-world problems we help solve by maintaining the standards required by the Money Laundering Regulations (MLR).
Smith warned against lowering this regulatory standard because it could lead to a “race to the bottom” in compliance practices that would lead to “dangerous, unregulated and unreliable foundations” that “would not ensure compliance.” protection of people and our markets, or even their proper functioning.” GOOD.”
Despite this, Smith stressed that the FCA remains committed to working closely with government, industry and international partners to build a crypto sector founded on sound and trustworthy principles.
The FCA regulatory regime
Over the past year, the FCA has introduced several crypto regulations, including a particularly strict marketing regime. These rules allow the government to impose unlimited fines on companies and even prison sentences for executives. The regulations also apply to businesses based outside the UK that serve UK customers.
Recent data highlights the challenges crypto companies face in this regulatory environment. Only four of the 35 crypto applications submitted to the FCA in the year ending March were approved.
Additionally, reports show that registrations of crypto asset exchanges and custodian wallet providers with the FCA have fallen by more than 50% over the past three years. This decline reflects growing frustration within the industry with the UK’s regulatory landscape.
