Crypto Firms Growing Frustration with UK Regulatory Processes

Recent data reported by the Financial Times through law firm Reed Smith indicates a significant decline in registrations for crypto asset exchanges and custodian wallet providers with the UK’s Financial Conduct Authority (FCA). The numbers show that in the past three years, registrations have dropped by more than 50%, pointing to a growing frustration within the industry regarding the UK’s regulatory environment.

One of the main issues highlighted in the report is the slow and time-consuming approval processes implemented by the FCA. The average approval time for crypto registration applications stands at 459 days, with some firms waiting over two years for a decision. This prolonged process has led to many crypto businesses seeking more efficient regulatory environments abroad, ultimately turning away from the UK as a result.

The data also reveals that since 2020, the FCA has processed over 300 applications, but only 45 firms have successfully gained approval, reflecting an acceptance rate of around 15%. This low approval rate, coupled with the stringent criteria and rigorous scrutiny imposed by the FCA, has made the UK an unattractive destination for many crypto firms.

The growing frustration within the industry has led to an exodus of crypto businesses from the UK, with many choosing to relocate to more accommodating jurisdictions that offer a more favorable regulatory environment. This trend not only threatens the UK’s ambitions to establish itself as a global hub for digital assets but also highlights the challenges posed by the FCA’s current regulatory approach.

Critics argue that the UK is applying outdated regulatory frameworks to a rapidly evolving industry, which stifles innovation and drives firms away. The lack of flexibility and adaptability in the regulatory processes within the UK has caused many to question the country’s position in the global crypto market.

The FCA has defended its cautious approach, emphasizing market integrity and consumer protection as top priorities. However, the growing frustration within the industry calls for significant reforms to be made in order to retain the UK’s competitive edge in the global crypto market. Without addressing the concerns raised by crypto firms, the UK risks losing its position as a leading destination for digital asset businesses.