The UK’s Financial Conduct Authority (FCA) has responded to criticism of its stringent crypto firm registration process.
The FCA defended its approach as necessary for maintaining the integrity of the financial system. Val Smith, the head of payments and digital assets in the authorizations division of the FCA, addressed the concerns in a recent statement.
UK FCA wants to balance innovation and security
Smith acknowledged that some have suggested the FCA is too tough on crypto firms. Some even stated that this stance could potentially stunt innovation and questioned the UK’s position as a global financial leader.
However, she emphasized that the regulator never dismisses applications outright. Smith added that instead, the FCA treats the risk of money laundering with utmost seriousness.
The FCA’s head of payments mentioned that allowing illicit money to flow freely can destroy lives. Smith also highlighted the real-world impacts of financial crime, including terrorism, organized crime, sanctions evasion, and human trafficking.
The FCA’s stringent standards, like the Money Laundering Regulations (MLRs), aim to combat these threats.
FCA stresses its strong universal standards
Smith rejected the notion of relaxing standards. Instead, she argued that a “race to the bottom” would not protect people or markets.
To address this, the FCA envisions close collaboration with government partners, industry stakeholders, and other jurisdictions to develop a crypto sector built on reliable foundations.
The FCA holds all firms seeking registration to universal standards, not just crypto companies. Smith acknowledged the challenges faced by the developing crypto industry in adapting to new regulatory processes.
To address this, the FCA offers pre-application meetings and practical support throughout the registration process.
“Innovations built quickly on unsafe, unregulated and untrusted foundations become a house built on sand – likely to collapse. Instead, we want to closely collaborate with partners across government, industry and other jurisdictions to develop a crypto sector that’s built on reliable, sturdy foundations,” Smith said.
While the number of registered crypto firms remains under scrutiny, Smith affirmed that the FCA’s focus will remain on protecting consumers and maintaining financial system integrity.
The regulator will continue to support prospective firms in meeting required standards while weeding out those that pose potential harm.
Smith concluded by stressing the importance of upholding regulatory standards like the MLRs, stating, “We aren’t just protecting the present; we’re safeguarding the future.”
She concluded that the FCA’s vision is to foster a healthy, globally competitive, and vibrant crypto sector in the UK.
