The UK is ramping up efforts to secure its crypto sector as it aims to become a leading hub for Web3 innovation.
The Financial Conduct Authority (FCA) has revealed that 90% of recent crypto firm applications for registration have been rejected due to insufficient fraud prevention and anti-money laundering safeguards.
In a report, the FCA outlined its findings, stating that the feedback is designed to help crypto companies better prepare for the licensing process in the UK.
The FCA received 359 registration applications from crypto firms between January 2020 and September 2023. Of these, only 47 companies (14%) successfully registered. Meanwhile, 40 firms (12%) were rejected, and a significant number - 240 firms (70%) - withdrew their applications before a decision was made. Additionally, 13 firms (4%) were directly refused by the FCA.
The financial authority emphasized that many submissions lacked essential elements required for a proper assessment. "We have rejected submissions that didn't include key components necessary for us to carry out an assessment, or the poor quality of key components meant the submission was invalid," the FCA said.
The FCA's feedback is intended to guide crypto asset applicants, consultants, and trade associations, encouraging them to adhere to UK laws designed to combat money laundering. The authority warned that any crypto firm aiming to market to UK consumers after October 8, 2023, must ensure their promotions align with the country's financial promotion rules for crypto assets.
Since July 2023, the crypto industry has been formally regulated in the UK, and the number of crypto holders in the country is expected to reach 23.9 million by 2025, according to data from Statista. As more young people in the UK engage in crypto trading, the National Health Service (NHS) has flagged concerns over crypto addiction as a growing public health issue.
The UK is not alone in its efforts to tighten regulations around crypto.
India, for example, requires all crypto firms operating in or expanding to the country to register with the Financial Intelligence Unit, comply with anti-money laundering regulations, and collect KYC (Know Your Customer) details from all users. These steps are part of a global push to prevent the misuse of crypto assets by criminals and terrorists.