In a troubling discovery, a new report from the Financial Conduct Authority (FCA) reveals that a staggering 85% of cryptocurrency companies that applied for a license with the regulator failed to meet its minimum standards.
Posted on January 26 The reportcommissioned by the Treasury committee of parliamentarians, exposed a worrying lack of compliance with anti-money laundering and anti-terrorist financing requirements.
Although the UK has not established a structured control system for digital currencies, the FCA has pleaded with any company dealing in cryptocurrency to sign up to its anti-money laundering system in order to continue providing services in the country.
Crypto confessions: what did the FCA discover?
At the recent session of the Treasury Committee, the Financial Conduct Authority (FCA) revealed that a significant proportion of recent applications from cryptocurrency companies were found to be of a “poor standard”, with only 5% making it through the approval process. initial evaluation.
Overall, the FCA reported that 73% of applications had been withdrawn or rejected, a much higher failure rate than when the regulator took up a new mandate.
In some extreme cases, the FCA identified potential links to financial crime or organized crime and promptly referred these companies to the relevant law enforcement agencies.
In addition, the regulator found that a number of key staff at some companies “lacked the appropriate knowledge, skills and experience to perform their roles and control risks effectively.”
“We are in the middle of an investigation into crypto regulation, and these statistics have not misled us into the impression that parts of this industry are a ‘wild west.'”
Harriett Baldwin, Treasury Committee.
The problematic relationship between crypto companies and FCA
Crypto companies and the Financial Conduct Authority (FCA) have had a turbulent relationship in recent years.
From the FCA He took care regulation of crypto assets in the UK in January 2020, the two parties have been at odds over the FCA’s stance on the sector.
The FCA has taken a hard line on crypto companies, with strict regulations on doing business, including prohibiting them from offering certain services. This has led to the FCA severely fining several cryptocurrency companies for not abiding by its rules.
Despite this, the FCA has said it is open to innovation and willing to work with crypto companies to ensure proper regulations are in place.
However, the FCA has been criticized for being slow to react to the cryptocurrency industry and for needing to clarify how cryptocurrency companies should be regulated. As a result, many crypto companies have chosen to focus on jurisdictions with more welcoming regulatory environments.
the road ahead
Crypto companies have been one of the least exemplary groups in meeting regulatory standards. This has become increasingly apparent in recent years as governments around the world have introduced stricter regulations in the cryptocurrency space.
In the past few years alone, several large crypto companies have received heavy fines from regulators for failing to comply with KYC and AML policies. Coinbase, one of the largest cryptocurrency exchanges, was fined $6.5 million by the US Commodity and Futures Trading Commission for breaching regulations in March 2021.
Regulators mean business when they say they will punish those who don’t meet their standards. Therefore, crypto businesses need to take a proactive approach to comply with regulations. Failing to do so could have serious repercussions, not only in terms of fines and penalties, but also in terms of your reputation.
