UK Cryptocurrency Company Registration Success Rate Less Than 15%? FCA: Not Related to Company Size

Chair of the Financial Conduct Authority (FCA) in the UK, Nikhil Rathi, stated during yesterday's 19th Treasury Select Committee hearing that the size of cryptocurrency companies will not be a determining factor for FCA approval of their registration. However, the application process is notoriously difficult, with only over 40 out of hundreds of companies meeting the standards so far, including cryptocurrency exchange Binance, which has abandoned its application.

Low Success Rate for Cryptocurrency Companies Applying to Operate in the UK

According to a report by Coindesk, FCA Chairman Nikhil Rathi claimed during a hearing on Wednesday that the assessment of registration requests from cryptocurrency companies is not influenced by their size or market share.

It is understood that since January 2021, companies offering cryptocurrency-related services are required to comply with the revised Money Laundering Regulations (MLR) of 2017 and submit registration applications to ensure the protection of investor rights.

However, according to official data, as of July this year, a total of 319 cryptocurrency companies have submitted operational registration applications to the FCA, but only 43 have passed the review, resulting in a pass rate of only 13.1%. The remaining 230 are still under review or have been temporarily withdrawn, while 30 have been completely rejected.

One of the most talked-about cases is the world's largest cryptocurrency exchange, Binance, which was rejected by the FCA in 2021 for failing to comply with regulatory principles and was ordered to immediately cease related operations. Its compliance journey came to an end in June this year, with Binance's UK division confirming the cancellation of its registration with the FCA.

Many cryptocurrency companies attribute this to the lengthy and complex review process, pointing out the inefficiency of the FCA and the lack of clear instructions on the prerequisite information required from companies.

In response, the authorities stated that there are specific evaluation criteria on their official website, including a comprehensive business model and scope, the roles and responsibilities of business partners, and most importantly, "specific policies, systems, and control measures for risk management."

The FCA added:

We are not doing this because we oppose innovation, but because we must ensure the implementation of anti-money laundering standards, and those rejected companies have failed to convince us that they can meet the standards.

Is it Beneficial or Detrimental for the FCA to Establish Clear Regulations for the Cryptocurrency Industry?

In June this year, the UK approved the Financial Services and Markets Bill 2023, granting and expanding the authorities' power to regulate cryptocurrencies and stablecoins.

It is also evident that the FCA has been implementing a series of enforcement measures in the cryptocurrency industry and ecosystem over the past six months. This includes dismantling dozens of illegal cryptocurrency ATMs, preliminary drafting of trading market rules, and the requirement for promotional activities to be officially authorized.

Recently, the FCA has taken a firm stance against meme culture in the crypto space, aiming to curb the improper promotion of financial products on social media platforms, which has been criticized for ignoring freedom of speech and limiting market development.