UK’s FCA Rejects 87% of Licensing Applications, Takes 459 Days to Review One

• The UK financial regulator declined registration for 87% of crypto firms last year.
• Applicants must wait an average of 459 days for the regulator's decision.
• Overly strict licensing requirements, lengthy review processes, and inadequate rules on crypto promotions drive firms to seek registration in other jurisdictions.

The UK Financial Conduct Authority (FCA) rejected 87% of crypto firms licensing applicationsdue to insufficient anti-money laundering (AML) and fraud detection practices in 2023.

A Finextra report reveals that the number of firms applying for registration with the FCA declined by 51% within three years due to overly strict requirements.

UK Crypto Firms Struggle to Meet FCA Standards

According to FCA's annual report, most companies fail to meet the regulator's AML, fraud detection, and consumer protection requirements. Only 44 firms received the registration last year.

An FCA spokesperson argues the regulator provides detailed guidance and support for crypto firms wishing to obtain a UK license.

However, the UK's National Audit Office notes the FCA lacks professionals who understand crypto, which leads to long application processing times. Companies must wait an average of 459 days for a decisionon their application.

Firms aren't going to wait forever for approval, particularly if another jurisdiction seems to offer a comparatively quick process.Bret Hills at Reed Smith law firmCrypto Firms Seek New Pastures

Finextra suggests that FCA's stringent stance and application review delays have weakened industry players' interest in licensing.

The FCA received just 29 applications last year, compared to 59 two years prior. In Q1 2024, only seven firms sought registration.

It's likely that crypto firms are giving up waiting and are starting to look forregistration opportunities abroad, which undermines the UK's ability to become the global crypto hub.

Are FCA's Crypto Promotion Rules Too Harsh?

Nearly 190 firms have withdrawn their applications voluntarily in the last three years due to FCA's tough rules on crypto promotions.

The rules include a 24-hour cooling-off period, which means investors must wait for 24 hours to finalize their crypto investments. FCA notes that it provides investors with the time to reconsider their decisions and assess related risks.

The FCA also requires crypto firms to explicitly outline associated risks, assess investors' crypto knowledge, and maintain detailed records.

Since the new regulation came into effect in October 2023, theFCA has identified over 1,000 breaches and issued 450 consumer alerts.

Closing Remarks

The FCA's stringent licensing requirements and lengthy application processes have deterred crypto firms from seeking registration in the UK.

While these regulations aim to protect consumers, they also halt capital inflow into the countryand undermine its potential to become the leader in digital assets adoption.

It appears that the UK needs to balance regulation with support for innovation to thrive in the crypto space.

References

• Annual Report and Accounts 2023-24 (FCA)
• FCA rules and slow approval times dent the UK's aspirations to become a global crypto hub (Finextra)

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