The Financial Times recently reported that crypto firms are increasingly opting to avoid the UK due to burdensome and time-consuming regulatory processes. According to a report by law firm Reed Smith, registrations for crypto asset exchanges and custodian wallet providers with the UK’s Financial Conduct Authority (FCA) have dropped by over 50% in the past three years. This decline is evident as the FCA received only 29 registration applications between May 2023 and April 2024, significantly lower compared to the previous years.
One of the major issues highlighted by the report is the lengthy approval process for crypto registration applications in the UK. The average approval time for the FCA stands at 459 days, and some firms have had to wait over two years for a decision. The slow and complex process has led to frustration among crypto businesses, prompting many to look for more efficient regulatory environments elsewhere.
The report also revealed that since 2020, the FCA has processed over 300 applications, but only 45 firms have been successfully approved. This low acceptance rate of around 15% has raised concerns among industry critics who argue that the FCA’s stringent criteria and rigorous scrutiny make the UK an unattractive destination for crypto firms. Many firms, including major centralized exchanges, have opted to relocate to more crypto-friendly jurisdictions.
The trend of crypto firms moving away from the UK poses a significant challenge to the country’s ambitions of becoming a global hub for digital assets. Many companies have expressed concerns that the UK’s regulatory frameworks are outdated and stifling innovation in a rapidly evolving industry. The FOI request by law firm Reed Smith also highlighted that 186 firms had withdrawn their applications over the past three years, indicating the challenges posed by the FCA’s regulatory approach.
While the FCA has defended its cautious approach by emphasizing market integrity and consumer protection, the growing frustration within the industry suggests that significant reforms are needed. Without addressing the regulatory burdens and streamlining the approval process, the UK risks losing its competitive edge in the global crypto market. The exodus of crypto firms from the UK emphasizes the urgent need for the country to adapt to the changing landscape of the industry.
