UK to Propose New Crypto Rules While FCA Closes Registration

The Financial Conduct Authority (FCA) is ending its Temporary Registration Regime (TRR) for crypto asset businesses on March 31, and those companies that are not registered may not be allowed to continue operations in the U.K. At the same time, some news outlets have reported that the U.K.’s finance minister could announce a new regulatory regime for crypto in the coming weeks. 

Registering with the FCA is not as easy as it seems. In fact, only 33 companies have managed to register, and as of March 25, another 12 were on a temporary registration list, including Revolut and Blockchain.com. 

Since the FCA was granted powers to supervise crypto firms in 2020, it has requested that companies register with the regulator and comply with anti-money laundering and counter terrorist financing legislation (AML/CTF). While this is not the only element that the FCA assesses in the applications, it carries a lot of weight in the final decision of whether to allow a company to be registered or not.

The TRR was established in 2020 for those crypto asset firms that were providing services, allowing them to continue trading for some time until their applications were resolved. The first deadline to close the TRR was July 9, 2021, but it was extended until March 31, 2022. 

According to the FCA, a “high number” of crypto business aren’t meeting the required AML requirements, and more than 80% of the firms assessed by the regulator have either withdrawn their application or been rejected. One of the latest to withdraw its application has been Wirex, who may serve its U.K. customers from its base in Croatia. 

See also: Crypto Payments Firm Wirex Withdraws from FCA Registry

For companies that are in the temporary list, like Revolut and Blockchain.com, the situation is unclear yet. As the FCA stated on its website, being in the temporary list doesn’t mean that the FCA considers them as fit and proper, nor that the regulator has made any determination of whether they comply with AML rules.

This means that as of April 1, they may not be able to provide crypto-related services in the U.K. while they are still waiting for a final decision from the regulator. Revolut, like other companies, could choose to register in other European countries to serve its customers, but the lack of registration in the U.K. could affect the way it provides services in the U.K. 

In the meantime, the U.K. government is planning to announce a new regime to regulate the cryptocurrency market, focusing on stablecoins, according to CNBC. In the U.K., the Bank of England has made some statements about the need of new regulation for crypto assets — and the need to study the role of a central bank digital currency for the country — but there aren’t any specific proposals yet. 

The U.K., like the U.S. and Europe, seems to put an emphasis on stablecoins, given their exponential growth in term of usage and the potential financial stability risk.

However, the U.K. may be preparing a favorable package for the industry, according to CNBC. This would be in stark contrast to the European regulation on stablecoins — the Markets in Crypto Asset regulation — which imposes significant requirements on stablecoin issuers looking to launch and operate in Europe. 

Read more: Crypto Promotions in the UK Will Be Harder To Get Approved 

While the government may take a more friendly approach to crypto businesses, the FCA continues strengthening its rules for companies in this space. On March 23, the FCA closed a consultation on crypto promotions, and new rules may be published in summer 2022.

For the time being, crypto promotions in the U.K. are only supervised by the Advertising Standards Authority (ASA). The ASA doesn’t have the same powers as the FCA, and companies are subject to a much more lenient set of rules. 

Under the new rules, the FCA will apply the same financial promotion rules to crypto assets as to other high‑risk investments, and this would require firms to comply with additional obligations and approvals for their promotions.