The Financial Conduct Authority (FCA) became the UK cryptoasset firms’ anti-money laundering (AML) and counter-terrorist financing (CTF) supervisor on January 10, 2020. We have to ask ourselves: “How well is it serving its function as the new registration regime’s gatekeeper after two years?”
Prior to the establishment of the new framework under the Money Laundering Regulations, a significant number of crypto businesses were already trading (MLRs). Those firms that began operating before 10 January 2020 and submitted their registration applications by 16 December 2020 were allowed to the Temporary Registration Regime (TRR), a transitional regime that permits them to continue trading while their applications are processed.
The FCA said it was unable to examine all of the applications from these existing entities by the original deadline of 9 July 2021 because to the complexity and calibre of the applications received, as well as the pandemic. As a result, the TRR was extended until March 31, 2022.
The number of crypto businesses with temporary registration has been decreased from the original 90 or so to 33 as of the end of December 2021 – the most recent numbers available. Clearly, the FCA has made considerable gains. However, a large number of businesses are still operating under the TRR, despite the fact that the extended deadline is only a few weeks away. The FCA will not want to request for another extension to the transitional regime’s deadline, so it will be under a lot of pressure to make decisions on the remaining applications as quickly as possible.
The FCA’s recent ‘streamlining’ of its decision-making procedure has undeniably shortened the process by which corporations can dispute the FCA when it is ‘minded to refuse’ their applications. The streamlined approach, in theory, makes it faster and easier for the FCA to reject registration applications. It’s possible that the first crypto company to appeal a negative ruling to the Upper Tribunal could emerge shortly.
New enterprises that are not part of the TRR are unable to engage in crypto asset activities covered by the MLRs unless and until their registration applications are approved. With the associated dangers to consumer protection and the March deadline coming, the FCA’s attention will surely be focused on firms presently trading within the TRR.
On the FCA’s website, just 30 crypto businesses are now listed as registered. In public pronouncements, the FCA has stated that a large percentage of applicants — on the order of 90% – are abandoning their applications. The FCA has cited this as proof of how its tough approach is helping to achieve its goal of consumer protection. If, on the other hand, the low number of registered UK firms allowed to provide services to UK consumers is forcing these customers to use offshore firms, the FCA’s tough approach must be questioned as to whether it is actually fulfilling the purpose of consumer protection.