The Financial Times reported that crypto firms are increasingly turning away from 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 plummeted by more than 50% in the past three years. This sharp decline indicates growing frustration with the country’s regulatory environment.
A Freedom of Information (FOI) request by Reed Smith revealed that between May 2023 and April 2024, the FCA received only 29 registration applications, a significant drop from previous years. The average approval time for crypto registration applications stands at 459 days, with some firms waiting over two years for a decision. This prolonged process has prompted many crypto businesses to seek more efficient regulatory environments abroad, leading to a growing exodus from the UK.
Since 2020, the FCA has processed over 300 applications, but only 45 firms have successfully gained approval, reflecting an acceptance rate of around 15%. Critics argue that the FCA’s stringent criteria and rigorous scrutiny have made the UK an unattractive destination for crypto firms. Many companies believe that the UK is applying outdated regulatory frameworks to a rapidly evolving industry, stifling innovation and prompting them to look for more crypto-friendly jurisdictions.
The trend of crypto firms moving away from the UK threatens the country’s ambitions to establish itself as a global hub for digital assets. The FOI request by Reed Smith also revealed that 186 firms had withdrawn their applications over the past three years, highlighting the challenges posed by the FCA’s regulatory approach. Although the number of withdrawals decreased in the last year, the overall trend suggests that significant reforms are needed to prevent the UK from losing its competitive edge in the global crypto market.
The FCA has defended its cautious approach, prioritizing market integrity and consumer protection over the speed of processing applications. However, the growing frustration within the industry indicates that without significant reforms, the UK may struggle to keep up with other more crypto-friendly jurisdictions. The country’s regulatory burdens are pushing crypto firms away, posing a challenge to its position in the evolving digital assets market.
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