Crypto firms in the UK are facing major hurdles in gaining approval from the Financial Conduct Authority (FCA), with almost 90% of applicants failing to meet the regulator’s fraud prevention and anti-money laundering (AML) standards, according to the FCA’s annual report for 2024.
The report highlights that out of 35 applications received over the past year, only four were approved, while 15 applications were withdrawn and nine rejected outright.
The FCA’s chief concern? Weak AML controls and inadequate fraud protection measures, which the regulator says are essential for ensuring that crypto firms comply with the UK’s financial laws.
FCA Rejects Majority of Crypto Applications for Poor Compliance
The FCA was clear about its reasons for rejecting or seeing most applications withdrawn: insufficient compliance measures. In a feedback statement, the regulator explained that it had to reject several submissions for not including vital components needed for a full assessment, or because the quality of the application was deemed too low to meet necessary standards.
In total, the FCA rejected 87% of crypto registrations due to poor AML controls. This raises concerns about how well crypto firms are safeguarding against potential financial crimes like money laundering.
FCA Tightens Rules on Crypto Ads
In addition to its tough stance on registrations, the FCA has also ramped up its oversight on crypto advertising. In June 2023, the regulator finalized a new “financial promotion perimeter”, aiming to ensure that crypto ads in the UK are clear, fair, and not misleading. This initiative responds to growing concerns about the proliferation of crypto scams, which have become a major issue for UK consumers.
The FCA reported that public awareness of crypto scams is rising, with 63% of UK consumers who contacted the FCA about a scam doing so before they had invested—a notable increase of 5% compared to 2023.
Crypto Firms Eyeing Alternatives as UK Struggles with Backlog
For crypto firms hoping to set up shop in the UK, the FCA’s long approval times and increasing rejection rates are raising alarms. On August 30, international law firm Reed Smith warned that the UK’s regulatory environment might be driving crypto firms abroad. With average processing times for crypto registration now at 459 days, many companies are starting to look for more welcoming jurisdictions outside the UK.
Over the past three years, the FCA has spent 25 years’ worth of manpower on processing crypto firm applications, but that hasn’t sped up approvals. In fact, 186 firms withdrew their applications over the last three years, frustrated by the delays.
As Brett Hillis, a partner at Reed Smith, noted:
“If crypto firms are giving up on the UK and looking elsewhere, it should send a clear warning about London’s competitiveness in this sector.”
Looking Ahead: Will the UK’s Crypto Scene Lose Its Edge?
With the regulatory landscape tightening, many in the crypto space are questioning whether the UK can continue to be a global crypto hub. The long delays and growing backlog are making it harder for crypto firms to get up and running, and with competitors offering faster approvals and more favorable conditions, the UK risks falling behind in the race to attract new crypto startups.
As the FCA pushes for stricter compliance and better fraud prevention measures, crypto firms will need to take a closer look at the regulations they must meet—or risk being shut out of one of the world’s biggest financial markets.
