The U.K. Financial Conduct Authority (FCA) reported that 87% of cryptocurrency companies that applied for licensing under the country’s money laundering rules failed to secure approval in its latest fiscal year.
Out of 35 applications received in the 12 months ending March 31, only four managed to qualify, according to the FCA’s annual report.
Successful applicants included BNXA, Binance’s payments partner; a U.K. unit of PayPal; and Komainu, a crypto custody joint venture of Nomura. The remaining applications were either rejected or withdrawn for lacking necessary components.
“Over 87% of crypto registrations were rejected, withdrawn or refused,” the FCA stated. “We help firms applying for authorization by communicating our expectations and issuing guidance on good and poor practice.”
Since taking on the role of overseeing crypto firms under anti-money laundering regulations in 2020, the FCA has received 359 applications but has granted money laundering registration to only 44 companies.
The regulator is awaiting new legislation that would allow it to fully authorize companies to operate in the country. However, this process may face delays, as the newly elected Labour government has paused its crypto plans.
The challenging registration process has prompted some crypto companies to leave the U.K. in search of easier registration processes elsewhere. Complaints include long wait times, a lack of feedback, and what some describe as unfair treatment by the regulator.
That said, U.K. banks, including Starling Bank and Chase UK, blocked clients from engaging in cryptocurrency transactions. Data from Britain’s fraud reporting agency Action Fraud indicates that crypto fraud in the UK surged by 41% in the previous year, reaching a record high of £306 million ($372.3 million).
Chase UK, the British digital bank owned by JPMorgan, also prohibited its customers from conducting cryptocurrency transactions in late 2023. The prohibition includes using debit cards for crypto purchases or conducting outgoing bank transfers for crypto-related activities.
The FCA’s new rules demand crypto firms to ensure their marketing is “clear, fair, and not misleading,” incorporating prominent risk warnings and eliminating incentives like “refer a friend” bonuses. A 24-hour cooling-off period for new investors and stringent advertising guidelines are also part of the regulations.
The new regulations also require firms promoting crypto products or services to include a clear risk warning in their promotions and verify that individuals have the necessary knowledge and experience to invest in cryptocurrencies. Non-compliance could result in penalties, including up to two years in prison.
The impact of these regulations is already visible in the UK’s crypto market, with firms like Bybit and PayPal withdrawing certain services. Luno, another prominent crypto company, has restricted some clients from investing in cryptocurrencies on its platform.
