The End of the Temporary Registration Regime for Cryptoasset Providers

The Deadline Approaches

Thursday 31st March 2022 could spell real trouble for a number of cryptoasset firms who are still yet to be approved by the Financial Conduct Authority (FCA) in the UK. The FCA has fired warning shots at the industry in recent days, strongly rebuking the remaining crypto ATM providers who were still operating without the appropriate permission, and issuing statements about crypto firms such as Binance buying their way into registration by acquiring beneficial ownership in already registered crypto firms. 

For every other crypto provider currently operating in the UK under the temporary regime, there is a real possibility of their permission to operate falling off a cliff edge, unless the FCA decides to extend the deadline once again. Opinions appear to be divided as to whether they will decide to do this, but the remaining firms may have to shut up shop in the UK, or move their business elsewhere. The success rate hasn’t been great for applicants either; only a quarter of applications have been successful, and half of those who have applied have either withdrawn from the process or have seen their applications rejected. 

Sentiment towards the registration regime has been mixed. On one hand, the FCA has clearly stated that many crypto providers are not meeting AML standards, and firms have quietly withdrawn their applications out of fear of running into issues with regulators and banking partners elsewhere in the world. On the other hand, some firms have decided to come out fighting - issuing statements disagreeing with the regulator's decision, and moving their headquarters elsewhere.

From our own conversations with crypto providers who are still waiting to be assessed, uncertainty and fear is rife.The FCA approved more firms over the period November to January than it had done since the regime began, but this traction seems to have slowed down, with only two firms being approved in the whole of February. This has left more than 15 companies still to be approved, including larger firms like Revolut and Blockchain.com. With less than two weeks to go, it's unlikely that they will all be reviewed come 31 March. 

Why Crypto Providers Need to be FCA Regulated

At Fiat Republic, we are strong supporters of regulation within the crypto industry. The UK’s financial services regulator is seen as the gold standard setter across the world. For crypto firms who can win the FCA’s approval and trust, this can only be a positive step towards creating a safer and more accessible environment for potential and existing crypto consumers to access the UK market.

That being said, it appears that there is still a level of mistrust between the FCA and crypto providers, and this is something we are looking to address at Fiat Republic. We believe that the crypto industry and regulators such as the FCA need to collaborate more effectively on the regulatory framework for cryptocurrency, and work together to ensure that the industry is safe for consumers to engage with. We would welcome the opportunity to work more closely with the FCA and help them better understand this new asset class, and our ‘Fiat Republic Consortium’ will help better prepare crypto providers as they enter this new dawn of regulation. Expectations from both sides need to be better managed, concerns understood, and clarity achieved. Only then can the crypto industry and the regulators effectively work together.