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Cryptocompanies In The UK Fear Being Expelled

29 March 2022 14:20, UTC
Oladotun Ayotomiwa

If Bitcoin firms fail to register with the Financial Conduct Authority (FCA) by a major deadline this week, they might be compelled to shut down their operations in the United Kingdom.

The Financial Conduct Authority, which is responsible for supervising how digital asset businesses prevent money laundering, has mandated that crypto service providers in the UK register by March 31. To provide enterprises on a temporary register an extra year to get a full license, the regulator gave them an extension last year. This extension will expire this year. As a result of their failure to fulfill the FCA's anti-money laundering rules, numerous crypto businesses had withdrawn their application materials.

The fate of companies on the interim registry, including Revolut, a $33 billion fintech business, and Copper, a crypto start-up with former UK Finance Minister Philip Hammond as an adviser, now hangs in the balance as the new deadline elapses in just days. Insiders in the crypto community have voiced displeasure at the FCA's approach to the crypto registry.

According to one lawyer who advises crypto firms on their applications, the regulator has been sluggish to accept applications and has often been unresponsive. The Financial Conduct Authority (FCA), as it’s written on this page, has so far accepted the applications of only 33 crypto companies. Many crypto-asset enterprises requesting registration aren't satisfying rules to prevent them from being exploited as a means of laundering or concealing illegal finances, a representative said.

Failure to reach the required standard may result in an applicant's application being withdrawn. Companies who choose not to withdraw have the option of appealing our refusal, even via the courts," says the statement.

What To Know

The Winklevoss twins' cryptocurrency exchange, Gemini, was one of the first to get FCA approval.

Clients must know that they are working with a company that has been thoroughly vetted, according to Blair Halliday, Gemini's head of the UK. According to Halliday, the establishment of crypto-asset registration was a crucial milestone for crypto in the United States. "It provided something to highlight as a critical differentiation for organizations who have the willingness to pursue regulatory clearances."

Lavan Thasarathakumar, the CEO of Global Digital Finance, said there has been "a lot of irritation" over the process. A "big backlog" of applications for the register is to blame for the FCA's poor progress, Thasarathakumar added.

The petitions of certain corporations are still being withdrawn, though. A recent withdrawal by London-based crypto trading business B2C2 from the FCA's provisional registration is an example. Spot trading has been relocated to the U.S. entity of B2C2 from Monday. A subsidiary approved by the FCA handles the company's derivatives operations, according to the firm.

There is an appeals mechanism for companies that have had their petitions refused by the FCA, but the process is lengthy and may have to be taken to court.

Gidiplus's application to join the Financial Conduct Authority (FCA) was rejected by a tribunal earlier this month.

Brexit Dividend

Global strategy director for crypto at 11:FS, Mauricio Magaldi stated the U.K. risks lagging behind the U.S., European Union, and other areas due to the present regulatory orientation.

Biden issued an executive order asking for government collaboration on digital currency monitoring, while EU parliamentarians recently rejected a plan that would have essentially prohibited bitcoin mining in the union.

"While big countries are identifying the potential and the danger, the UK is emphasizing the risk," Magaldi told CNBC.

Crypto enterprises might be forced out of the U.K. market if regulations and timelines move too quickly and too narrowly. This might put the United Kingdom at a disadvantage as it tries to become a global financial innovation leader after Brexit. Almost $12 billion was invested in the country's financial technology sector last year.

Crypto Regulations In The UK

Cryptocurrencies are not considered money by the Bank of England, since they lack the traditional features of money, and hence do not represent a danger to the stability of the financial system. The FCA and the Bank of England have, however, issued several cautions and guidelines about the use of crypto-assets and currencies since the legal repercussions, laws, and status of these assets and currencies may vary based on their nature, kind, and use. Some of the cautions are about the lack of regulatory and monetary protection, the position of cryptocurrencies as repositories of wealth, and the perils of speculative trading and volatility.

Because of the regulatory uncertainties surrounding cryptocurrencies, the United Kingdom's government set up a task group in 2018 to address the issue. AML/CFT and taxes issues were included in the taskforce's definitions of the three kinds of cryptocurrencies and the three methods in which they are employed. HM Revenue and Customs have released a brief on the tax treatment of cryptocurrency, claiming that their "unique character" means they cannot be compared to traditional investments or payments and that their "taxability" relies on the actions and participants engaged. Cryptocurrency profits and losses are taxed like any other asset.