Firms awaiting their fate are currently on a temporary register for digital asset service providers, while the FCA weighs out whether or not to approve them indefinitely. Some companies, like crypto wallet provider Wirex and digital asset brokerage Globalblock (BD4.BE) +2.96% have already finalised plans to conduct their business offshore and seek regulation in the EU.
Both firms have announced plans to continue serving their UK customers from Croatia and Lithuania respectively. This will be possible, as the FCA will continue to allow the services of crypto firms regulated in countries, the watchdog has deemed to have equivalent standards.
“We’ve seen a high number of cryptoasset businesses applying for registration not meeting standards there to help ensure firms are not used to transfer and or disguise criminal funds, […]. Firms that do not meet the expected benchmark can withdraw their application. Firms that decide not to withdraw have the right to appeal our decision to refuse, including through the courts,” a FCA spokesperson told City A.M..
So far, the FCA has only approved 33 firms, 80% of applicants were either rejected or have withdrawn their applications. Fintech Revolut, Blockchain.com and crypto custodian Copper are still limbo, awaiting a final decision on their application. Copper, advised by the UK’s former chancellor Philip Hammond, has set up an entity in Switzerland that the company should be allowed to access UK clients with, should their application be refused.
Since the UK’s departure from EU a lot of hope was put in the fintech sector to ensure the City of London’s status as a financial hub of Europe. With the FCA tightening rules on crypto-firms, fears are high it “could harm the UK’s reputation for innovation[.],” says Charles Kerrigan, Fintech partner at CMS (City A.M. 2022).
“This is an incredible piece of market innovation and as the world moves into Web3…I don’t think trying to hold people away from it is either realistic or a good idea, […]. The FCA’s role is to apply the law not write the law and it needs a steer from policy makers […]” continues Kerrigan.
Chancellor of the Treasury, Rishi Sunak, has put a lot of emphasis on wanting London to be a hub for fintech innovation and has in the past had worked to make it easier for firms to settle in the City. Reportedly, HM Treasury is expected to make an announcement later this month regarding crypto regulation in the UK.
*Stock price taken on 29.0.2022 at 11:02am.
*Russel-Jones Lily (28. March 2022). City A.M.: Top crypto firms face ejection from UK as FCA deadline looms. Last viewed on 29.03.2022 on https://www.cityam.com/top-crypto-firms-face-ejection-from-uk-as-fca-deadline-looms/.