While the UK has been a global leader in developing financial technology regulation, a more cautious approach is being taken with crypto, leading some prominent companies to head for the exit.
“It’s hard to change the culture in a large organization overnight, but that’s probably what we need to do at the FCA,” opines Ian Taylor, head of Crypto UK.
The Financial Conduct Authority has not been forthcoming with clear regulations, leaving 100 companies that have not met its standards for anti-money laundering procedures in registration hell. Investigation into how blockchain technology could be used for updating traditional financial market infrastructures only began last year.
“When we decide a firm does not meet the standard for registration, we are clear with them where they are going wrong. The money laundering regulations don’t include a provision allowing firms to withdraw their applications. However, in some cases, we may allow a firm to withdraw, stop operating, make the changes necessary following our feedback, and reapply. Firms that do not withdraw are issued a formal decision which they are able to appeal, including through the court,” said the watchdog.
As a result, venture capital investment in UK companies has bucked global trends in the first quarter of 2022, falling 70 percent year-on-year to $176.3 million, while the rest of the world surged over 200% in the same period.
Blockchain.com axed from interim list
The FCA became the gatekeeper of policing companies for anti-money laundering and counter-terrorism measures in 2020, requiring crypto companies operating in the UK to apply for registration.
Blockchain.com, one of the country’s largest crypto firms, recently underwent a round of funding that saw it valued at $14B. However, the company has had a bumpy ride trying to receive FCA approval. Blockchain.com was initially part of a list of 12 companies that received interim approval due to its anti-money laundering processes being deemed as meeting the FCA’s standards. However, it was dropped when the list later shed seven companies.
Majority of crypto sector has left the UK
Cryptocurrency firm Copper was also on the provisional list of 12 companies and remained when the list was reduced to five companies.
However, sources told the Guardian that the company is now eyeing a move to Switzerland, where it already has an office in Zug. Should Copper UK’s ambitions falter, this could jeopardize the $500M cash injection it is seeking from venture capital to place its valuation at $3B. Philip Hammond, a former UK chancellor, now a senior adviser at Copper, said that many crypto companies in the UK were considering migrating to Monaco, Switzerland, and Germany because of the uncertain state of the regulatory landscape in the UK.
Approximately two weeks ago, a spokesperson for UK crypto firm Blockchain.info told the Evening Standard, “As of last week, more than 90% of the sector has left the UK for more progressive countries in Europe.”
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