The United Kingdom’s financial regulator, the Financial Conduct Authority (FCA) has warned consumers against 111 crypto companies that are yet to register with the FCA.
Since Jan. 10, all U.K.-based crypto firms have had to comply with Anti-Money Laundering and Counter-Terrorist Financing laws, as well as to register with the FCA in order to operate legally. Many are yet to do so.
Mark Steward, FCA’s head of enforcement asserted at the “City & Financial’s City Week” event on June 22, that the unregulated crypto entities pose a threat to consumers, banks, and payments firms who do business with them, noting that:
“We have a number of firms that are clearly doing business in the UK without being registered with us and they are dealing with someone: banks, payment services firm, consumers. This is a very real risk so we are worried about that.”
The FCA has compiled a list of more than 100 crypto firms that appear to be operating unregistered, so that investors can double check if a firm the intend to deal with is non-compliant.
The financial watchdog appears to be extra vigilant in light of the burgeoning popularity of cryptocurrency in the UK. According to the FCA’s own recent survey 2.3 million UK adults now hold crypto. However, there has been a notable downward trend in investors’ overall understanding of the crypto assets they own.
Steward likened the growth of crypto industry to the Dutch tulip mania of the 1630s, noting that fear of missing out (FOMO) is driving many to speculate on highly volatile assets:
“The reason many are investing now is because they have a fear of missing out on what might be a boom. Leaving aside how volatile these instruments actually are, it has tulip mania written all over it.”
Operational hurdles related to the UK’s strict anti-money laundering laws could lead to many of these unregistered firms being put on hold, so far 51 crypto firms have withdrawn their applications to register with the FCA.
The U.K. government is actively trying to curb criminal behavior the utilizes crypto such as money laundering and terrorism financing.
According to The Times UK, earlier this month the London Metro Police called for legislative changes that would enable authorities to approach crypto in a similar fashion to cash-based crime.
The Metro Police are reportedly calling for the legislature to allow the freezing of crypto assets from businesses and individuals under police investigation, while also requesting stringent regulations which would make it harder for criminals to make crypto transfers.
The FCA has taken a highly cautious approach to crypto, with the government watchdog imposed a ban on crypto-derivatives platforms in January, while warning investors of the risks associated with crypto in that same month.
The FCA was appointed the supervisor of Anti-Money Laundering and Counter-Terrorist Financing measures on Jan. 10, 2021, and from that date, all U.K.-based crypto-asset firms have had to comply with AML regulations and register with FCA.
Firms operating before Jan. 10 of this year, had to apply for a Temporary Registration Regime (TRR) which allowed firms to continue trading while the FCA processed their full registrations were being assessed.
A lack of onsite processing due to the global pandemic resulted in a backlog of applications that are still being processed, and the FCA announced on June 3 that the final date for temporary registrations has been extended from July 2021 to March 2022.