UK Denies Crypto Companies The US Lets Operate

Crypto companies with US operations — including Wirex and B2C2 — withdrew their applications to register with a United Kingdom financial watchdog in recent months after the standards for acceptance were raised. 

The vast majority of crypto firms that have attempted to register with the UK’s Financial Conduct Authority (FCA) have been denied, the agency reported this week. There are now 41 companies listed on the FCA’s cryptoasset firm registry, according to the agency — or about 15% of applicants. 

An FCA executive, Sarah Pritchard, in a letter earlier this month said 85% of the firms vying for the regulator’s approval “were unable to demonstrate they met the required, minimum standards.”

Added Pritchard: “As part of the registration process we identified significant failures in relation to key controls such as customer due diligence, risk assessments, transaction and ongoing monitoring [and] governance.” 

Representatives for Wirex, a crypto payments platform, and B2C2, a digital assets liquidity provider, did not immediately return requests for comment. 

The FCA also had doubts that the people leading some of the denied crypto firms lacked the experience and knowledge needed to effectively and safely run the business. 

“It is difficult to judge whether leading personnel in firms ‘lack appropriate knowledge, skills and experience’ when it is judged against a lack of transparency and an absence of benchmarks and guidance from the FCA,” said Alexander Carter-Silk, cryptocurrency solicitor at Keystone Law. “There is no clear explanation as to what is applicable to crypto asset businesses, possibly because the FCA is fearful of the new technology.” 

Earlier this year, the UK set a deadline that any crypto entity hoping to conduct business in the country had to register with the FCA by April 2022. 

By March, just 27 of the 100-plus companies under consideration had been approved. A total of 58 firms withdrew or were denied by March 15 of the same year, the regulator said, and a “small number” of companies were found to be allegedly involved in criminal activities, the FCA said. 

Wintermute Trading, Galaxy Digital’s UK branch and Fidelity Digital Assets are among the firms that were able to make the cut. 

In the US, states have some control over which crypto services can be offered by which companies. For example, New York’s BitLicense law has prevented several companies from conducting business in the state, including Binance.US and Kraken. 

Companies hoping to operate in the UK have expressed frustration with the current system, which some leaders say puts too much emphasis on scrutinizing individual firms versus creating a set of standards. 

“Former chancellor Philip Hammond has declared that the UK needs to take measured risk in order for the UK to excel as a leader in cryptocurrencies, but for that the community needs measurements to abide by,” said Katharine Wooller, business unit director at digital asset protection firm Coincover.

“If we want to get ahead as a global leader in digital assets, we need to stop assessing firms, and start working with them to develop a regulatory framework.”

Source: blockworks.co