Crypto Regulation in the UK is Forthcoming
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The financial watchdog of the UK, the Financial Conduct Authority (FCA), announced an extension on its March 31 deadline for the Temporary Registration Regime (TRR) of crypto businesses. This extension however stipulated that “the TRR will close on 1 April, for all but for a small number of firms where it is strictly necessary to continue to have temporary registration. This is necessary where a firm may be pursuing an appeal or may have particular winding-down circumstances.”
Companies not already authorized or on the TRR are required to cease trading in the UK or face legal action for non-compliance with anti-money laundering (AML) and counter-terrorism financing (CTF) laws.
Beginning in 2020, AML and CTF oversight was added to the FCA authority and has since moved to include crypto firms in the scope of its registry. So far, only 33 companies have been fully registered and only 12 are on the TRR list. Many in the industry expressed frustration over processing times and inefficiencies with which the branch handled the registration process, with over 60 companies having withdrawn or been rejected. The FCA response was that those who were rejected were not meeting the AML and CTF standards.
The government is sending a clear message to UK crypto companies when it comes to criminal or illicit activity regarding money laundering. While the process may be flawed, it’s unlikely any of the companies denied were without violations and the FCA list is only the beginning of regulatory measures. Recent statements from the Bank of England have called for stricter oversight and definition of cryptocurrency, citing the potential effect of crypto on the stability of financial markets. With important regulatory measures occurring simultaneously in the EU and US, oversight on the UK crypto industry is all but guaranteed
Recently, it was hinted that the Finance Minister Rishi Sunak will announce forthcoming regulatory regime in the next few weeks. While many crypto supporters see the FCA and oncoming regulation as a negative for the industry, the government outlook on crypto, like that of the US, is exhibiting an open and benign stance. This is further evidenced by efforts to consult with crypto industry experts like those at crypto exchange Gemini, regarding the crypto market and stablecoins, to better understand the space.
Some in the industry, namely those unregistered with the FCA, will need to abandon trading in the UK. The flight of these companies causes some concern for the capital they will take with them especially in a post-Brexit economy, however, a clearer definition of the space will also make operating in the UK more inviting and safer for average investors. While not all regulation is welcome, some will help in the overall advancement and growth of the crypto industry. The trade-offs could be potentially positive and avoiding it all together is close to impossible.