UK’s FCA Defends Strict Crypto Stance to Combat Illicit Activities

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Jimmy Aki

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Jimmy Aki

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Jimmy has nearly 10 years of experience as a journalist and writer in the blockchain industry. He has worked with well-known publications such as Bitcoin Magazine, CCN, and Blockonomi, covering news...

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October 21, 2024

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In response to growing criticism over its strict registration requirements for crypto firms, the UK’s Financial Conduct Authority (FCA) defended its stance on Monday, October 21, stating that these measures are necessary to protect the integrity of the financial system.

UK’s FCA Justifies Tough Crypto Registration Rules, Citing Risks and Illicit Activities

Addressing concerns about the high rejection rate for crypto firm applications, Val Smith, head of payments and digital assets at the FCA, emphasized that “setting and maintaining standards people can trust is a key part of any thriving, competitive sector,” adding that the FCA is not arbitrarily rejecting applications.

Smith highlighted the severe risks inherent in the crypto industry, including terrorism, organized crime, and human trafficking.

She firmly rejected calls to lower registration standards, warning that relaxing these requirements could undermine market safety and result in a “race to the bottom.”

The FCA works closely with government bodies, industry leaders, and international regulators to create a solid foundation for the UK’s crypto sector.

According to Smith, the regulator evaluates a firm’s internal controls, operations, and the people managing it before deciding whether to grant registration.

Crypto firms, she noted, are held to the same high standards as traditional financial institutions.

“Our decision on whether to register isn’t just based on the controls and systems firms have in place. We look at the environment they operate in, the people involved, and the customers they aim to reach,” she explained, addressing the unique challenges faced by crypto firms.

Crypto Firms Struggle to Meet FCA Standards Amid Crackdown on Illicit Activities

Despite the FCA’s offer of pre-application meetings and ongoing support, many crypto firms struggle to meet the regulator’s high standards.

According to the FCA’s annual report released in September, only 13% of the 35 crypto firm applications were approved last year.

The remaining 87% were either rejected, withdrawn, or denied, highlighting the stringent regulatory environment.

In a related development, the FCA charged London resident Olumide Osunkoya on September 10 for unlawfully operating crypto ATMs without FCA registration.

This marks the first prosecution of its kind in the UK and forms part of the FCA’s efforts to combat illegal crypto ATMs linked to money laundering and other criminal activities.

Back in May 2023, the FCA conducted inspections at several locations, including Exeter, Nottingham, and Sheffield, suspected of hosting illegal crypto ATMs.

These efforts form part of the regulator’s broader crackdown on unregulated activities in the sector.

The FCA has stated that it continues to review the evidence gathered during these operations and will take further action where necessary.