FCA Warns Crypto Businesses Fail to Meet UK’s Money Laundering Regulations Standard

The UK’s Financial Conduct Authority (FCA) warned that a massive number of crypto businesses are failing to meet U.K requirements for the prevention of money laundering activities.

On Thursday, June 3, the FCA announced that it had extended the deadline for the so-called "Temporary Registration regime "from July 9 2021, to March 31 2022.

Businesses providing cryptocurrency-related services are required to register with the financial regulator. The watchdog introduced a temporary licensing regime for crypto businesses whose applications have not yet been approved to allow them to continue trading.

“A significantly high number of businesses are not meeting the required standards under the Money Laundering Regulations resulting in an unprecedented number of businesses withdrawing their applications,” the FCA stated.

The watchdog said that the extended deadline aims to allow cryptocurrency companies to continue doing their businesses while the agency continues carrying out robust assessments.

In December 2020, the regulator introduced a temporary registration regime after facing struggles dealing with hundreds of applications from crypto firms seeking to register their existing businesses.

The initial deadline for accepting applications was scheduled for January 10 2021, but the regulator pushed the deadline back to July 9, 2021, and has further extended the deadline until March 31 2022.

So far, only five firms (including Digivault, Archax, Ziglu, and two Gemini entities) are currently registered with the FCA.

The FCA has been forced to extend the deadline twice because several application reviews are still pending. The regulator said that many companies are also withdrawing their applications because they are not meeting the required standards under the money laundering regulations.

Late last month, UK treasury official John Glen stated that so far, over 90% of the crypto companies have withdrawn their applications following the FCA’s engagement in the review exercise. Glen also mentioned that several crypto companies have failed to employ the right expertise to implement anti-money laundering processes.

Glen further stated that there are 167 crypto companies still waiting for registration, and there are also 77 new cryptocurrency startups whose applications are pending a full assessment.    

Crypto Investment Risks

Last year, the UK’s Financial Conduct Authority warned local investors to alert the risk of the total loss to their capital for cryptocurrencies investments. The authority warned investors to be cautious of investment and lending products related to cryptocurrencies that come with very high risks.

The agency said that some companies offering investments or lending services linked to crypto assets claimed high returns generally involves high risks. The authorities also warned about the speculative nature of crypto assets.

Cryptocurrencies such as Bitcoin have long been associated with illegal activities like cyberattacks and money laundering because people transacting them do not reveal their identity.