FCA Extends Deadline For Cryptocurrency Extension

A UK financial markets watchdog is extending the deadline for cryptocurrency firms to be approved by the regulator, including neobank Revolut.

The Financial Conduct Authority (FCA) had previously given all companies trading with crypto-assets until Thursday, March 31 to obtain approval from the regulator. Companies that are not verified by the FCA would no longer be allowed to provide cryptocurrency services.

Companies have already had two years to prepare. In January 2020, the FCA warned that it would introduce stricter rules for cryptocurrency companies. The rules would be introduced to ensure businesses comply with new money laundering and terrorist financing laws.

Cryptocurrency has often been linked to illicit activities. Ransomware gangs prefer bitcoin as a payment method due to its ability to hide the money trail. Regulators have warned that Russian oligarchs could use cryptocurrencies to circumvent sanctions for the same reasons.

As part of the push, the FCA said companies providing cryptocurrency services would need to register with and be approved by the regulator. At first, companies had until January 10, 2021 to register. The deadline was later extended to March 31, 2022.

The FCA also introduced the Temporary Registration Regime, which allowed cryptocurrency companies that were already operational before December 2020 to continue trading while they were assessed by the watchdog.

“We need to be confident that company leaders are fit and competent and have the systems in place to properly manage the risk of financial crime,” said Mark Dixon, senior press officer at the FCA. Verdict.

To date, 33 companies have been approved and 12 are still on the list of temporary registrations. Of the companies assessed by the FCA, more than 80% have either withdrawn their application or been refused or rejected following the intervention of the regulator. Rejected companies can appeal the decision to the courts.

The FCA said cryptocurrency companies that can benefit from a stay of execution could do so where necessary, as they may appeal or may have special liquidation circumstances. That includes firms like $33 billion challenger bank Revolut and digital asset investment firm Cooper which counts former Chancellor of the Exchequer Philip Hammond among its advisers.

Revolut, like many other neobanks, provides cryptocurrency trading service.

“We do not comment on pending regulatory requests,” a Revolut spokesperson said. Verdict.

Cooper did not respond to requests for comment before this story was published.

Other cryptocurrency exchanges have opted out of the UK temporary regime.

“In the UK, we operated under FCA temporary permissions,” a Bitstamp spokesperson told Verdict. “We have been working since the introduction of the VASP regime in the UK to transfer the crypto business out of the UK with the aim of having our clients owned and managed in one of our regulatory hubs – Luxembourg, New York , Singapore and new in 2022 Bitstamp Global Ltd in the British Virgin Islands. To this end, we have voluntarily withdrawn from the UK Temporary Regime.

FCA slammed by over cryptocurrency rules

The preparation for the FCA cryptocurrency deadline has been fraught with frustration on both sides. For one thing, the watchdog has fired several warning shots in an attempt to encourage cryptocurrency firms to get their act together. He chastised unregistered cryptocurrency ATM providers, warning them that tighter oversight is imminent and that they had better shut down their operations or face enforcement action.

The FCA also expressed concerns over Binance’s purchase of a stake in Eqonex, which had been approved by the regulator. However, as Verdict reported in the past, the watchdog believes Binance is not fit to operate a regulated business in the UK. The FCA said it has the power to suspend or cancel a company’s registration on several grounds.

On the other end of the spectrum, many industry insiders have expressed frustration with the FCA, accusing the regulator of being slow and unresponsive.

“The process was a total disaster on the FCA side,” said a lawyer advising crypto firms. CNBC.

The FCA has also come under fire from industry stakeholders who believe the watchdog focuses too much on the risks of dealing with cryptocurrencies and not the opportunities in the nascent market.

Mauricio Magaldi, director of global strategy for crypto at fintech consultancy 11:FS, is one of them. While acknowledging that the market needs a “proper regulatory framework” to protect customers, he thinks the UK watchdog’s approach could lead to the country falling behind other markets.

“By moving too quickly and too narrowly, the rules and deadlines create hurdles for crypto businesses that could potentially crowd them out of the UK market,” says Magaldi. “A number of companies, including Copper and Revolut, may end up being forced to terminate their UK crypto services if their apps fail to respond. [the] holier than your standards.

This is to be expected. As research firm GlobalData noted in a recent report, as different governments around the world introduce new rules, market watchers shouldn’t “expect a simplified approach.”

“Fintech regulations are nascent, and governments are taking very different approaches,” the researchers wrote.

A quick look around the world highlights the different approaches taken by legislators. In the United States, President Joe Biden recently signed an executive order to force federal agencies to police the sector together. It remains to be seen whether the order put an end to rumors of a turf war between the US Commodity Futures Trading Commission and the Securities and Exchange Commission.

South Korea recently introduced strict registration rules, leaving only four cryptocurrency exchanges able to operate in the country.

The European Parliament recently rejected proposals to ban bitcoin while Bolivia banned bitcoin in 2014. On the other end of the spectrum, you have El Salvador, which made bitcoin legal tender in the fall of 2021. .

Perhaps this disparity in approaches is why some market players have taken a more comprehensive approach when judging the FCA.

“The FCA is at the forefront of a regulatory gold standard that will provide safe and secure access to cryptocurrencies and digital currencies to keep UK consumers safe and secure,” said Alex Reddish, managing director of the fintech start-up Tribe Payments. Verdict. “Despite the clear and overwhelming need for regulation, there has been a public backlash against slow comments and approvals, with many crypto businesses left in limbo as the deadline approaches. It seems the FCA is damned if it does and damned if it doesn’t.

Additionally, some companies have welcomed the application process.

“[We] felt the process was smooth and timely,” Chirag Patel, CEO of Digital Wallets at Paysafe, who was approved by the FCA to conduct cryptocurrency business in the UK in November. “It was of course a very rigorous process, but we welcome it and believe it is the right approach in the interests of UK consumers.”

globalData is the parent company of Verdict and its sister publications.

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FCA Extends Deadline For Cryptocurrency Extension

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