Crypto firms begin shuttering UK operations ahead of formal FCA registration deadline

Crypto startups are giving up hope of continuing to do business in the UK under pressure from the Financial Conduct Authority (FCA).

The finance watchdog has notified at least half a dozen crypto firms listed on a temporary version of its anti-money laundering register that they are likely to be rejected, according to people with knowledge of the situation.

With less than three weeks to go until the March 31 deadline for operators to win FCA approval, the regulator has given these companies a stark choice: either withdraw their applications and wind down any UK crypto operations or see the process through and risk outright rejection.

For some firms, the pressure has already told. SBI-owned B2C2 Ltd., one of the crypto sector’s largest market makers, has withdrawn from the temporary register — effectively ending its application.

From March 21, all of the company’s spot trading activities will be handled by B2C2 USA, the group’s US arm. Its derivatives trading business won’t be affected and will continue to be overseen by an FCA-authorised entity named B2C2 OTC Ltd.

“We are committed to ensuring this move causes as little disruption as possible and are working closely with our clients to ensure they continue to have a seamless trading experience with us,” said a spokesperson for the company. “Delivering on this objective includes meaningful dialogue with regulators and strict compliance with the regulatory framework in the jurisdictions where we operate.”

Sources suggest B2C2 is far from the only crypto firm packing up its UK business, but as yet The Block hasn’t been able to confirm which other companies are following suit.

One such firm on the temporary register, which a source described but refused to name, is also said to have been left with “no choice but to withdraw” and look for alternative locations for its crypto activities.

A spokesperson for the FCA said: “We have set a high, but achievable, standard required to be registered with us for AML purposes. Our focus is on ensuring firms are not a conduit for money laundering and they have the systems to properly manage financial crime risks.”

Household crypto firms

Household names such as $33 billion neobank Revolut and crypto custodian Copper are among the dozens of companies still languishing on the temporary register, a stopgap measure the FCA created after missing an earlier deadline to register firms. Their fate remains uncertain, but without full registration they will in theory be forced to stop all crypto-related activities in the UK at the end of March.

The Block earlier reported that, as of February 10, 96 UK crypto firms had applications awaiting a decision from the regulator. There are currently 21 firms on the temporary register.

Alex Wilkinson, a capital markets advisor, said the FCA’s reticence to process applications is driving businesses away from the UK.

“The consequences of their actions will have a significant detrimental effect on UK tax revenues and the FCA’s position as a premier regulator will continue to be eroded by more progressive regulatory regimes such as Singapore, Switzerland and Germany,” he added.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.