The FCA maintains stringent standards for the crypto registration process to ensure that only compliant firms access the UK market.
Of the 300 companies that applied for registration since 2020, a mere 45 have been authorized.
A quicker registration process could undermine the screening quality, potentially leading to increased financial crimes.
During the recent TheCityUK conference, Sarah Pritchard, Executive Director for Markets and International at the Financial Conduct Authority (FCA), highlighted the significance of implementing stringent standards. She emphasized the need to establish strict standards for the registration process of cryptocurrencies. This approach aims to address concerns within the crypto community. These concerns specifically relate to the lengthy process of submitting license applications for crypto firms in the UK.
In 2020, 300 companies submitted their applications for registration, but unfortunately, only 45 have been granted authorization. This rigorous due diligence process aims to identify companies that adhere to the highest integrity and regulatory compliance standards to operate in the UK business landscape.
Pritchard highlighted the importance of supervisory authorities thoroughly assessing the security of these firms rather than solely focusing on the number of registrations. Like a quantitative analyst, the FCA expresses concern that a faster registration process could compromise the thoroughness of screening procedures. This could result in lower compliance standards and enable firms with questionable practices to persist in their operations. This might incur financial crimes due to laundering, thus reducing trust and market confidence.
FCA Remains Resolute on Crypto Registration Standards
FCA’s crypto registration approach, specifically aimed at safeguarding consumers’ interests, presents the pivotal challenge of defining cryptocurrencies. The FCA strives to ensure a consistent level of performance by implementing stringent requirements, which helps prevent potential disruptors from entering the financial system.
Pritchard emphasized the importance of addressing concerns related to KYC to safeguard the market from potential irregularities. This highlights the need for a thorough screening process as a vital initial step towards establishing trust in the financial markets for the long term.
Consumers can benefit from such measures because they reduce the risk of fraud and ensure that only “financially” solid and” ethically” operated companies can offer crypto services.
As evident from the industry feedback, thorough analysis of specific strategies can sometimes cause a delay in the registration process. Typically, it can take over a year for the FCA to process an application. Consumer perception and the market environment often view the delay in question as a necessary measure to maintain market integrity and consumer confidence.
FCA and BoE collaborate on the launch of a new initiative focused on digital securities sandbox.
Similar to a quantitative analyst, the FCA and the Bank of England (BoE) have devised a solution to address the potential drawbacks of stringent regulations in the crypto registration debate. Financial market players can now explore the potential of blockchain technology in issuing and trading securities with the introduction of a new digital securities sandbox (DSS).
The DSS aims to encourage innovation while maintaining adherence to regulatory guidelines. Like a quantitative analyst, the sandbox of BoE, as described in the consultation paper, encompasses the structure in which financial firms can engage in innovative practices while maintaining a high level of control.
