UK’s FCA Defends Strict Crypto Regulations Amid Industry Criticism

Key Takeaways

• Only three new firms were added to the FCA’s list of registered crypto companies in 2024
• Smith emphasized the necessity of robust regulatory measures, stating that innovations built on unstable foundations are unlikely to succeed. 

The UK’s Financial Conduct Authority (FCA) has defended its strict regulatory approach to the cryptocurrency sector, responding to concerns that its policies may inhibit innovation. In a statement issued on Monday, Val Smith, the FCA’s Head of Payments and Digital Assets, addressed criticism regarding the agency’s high registration standards for crypto firms.

Smith emphasized the necessity of robust regulatory measures, stating that innovations built on unstable foundations are unlikely to succeed. “We aim to collaborate closely with government, industry, and international partners to build a crypto sector on reliable foundations,” she asserted.

The FCA has faced scrutiny over the small number of cryptocurrency firms it has registered under the UK’s Money Laundering Regulations (MLRs). Since 2020, the agency has received around 360 applications but has approved only about 50. Critics argue that the stringent standards may undermine the UK’s aspiration to remain a global financial leader.

In her remarks, Smith acknowledged the challenges posed by the registration process but insisted that the FCA does not dismiss applications outright. She highlighted the regulator’s commitment to assisting firms by offering pre-application meetings and practical support throughout the registration journey. “Relaxing our standards and creating a race to the bottom won’t protect people or ensure that our markets function well,” she stated.

Only three new firms were added to the FCA’s list of registered crypto companies in 2024, fueling further debate about the effectiveness of the regulator’s framework. Smith maintained that high standards are crucial for developing a competitive and vibrant crypto market in the UK, emphasizing the importance of tackling financial crime, including issues related to terrorism financing and human trafficking.

Additionally, the FCA has taken steps to address illegal crypto ATMs. Recently, the agency charged a London resident, Olumide Osunkoya, with unlawfully operating unregistered ATMs.