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The UK’s Financial Conduct Authority (FCA) has defended its stringent regulations on the cryptocurrency industry, countering claims that these rules hinder innovation and undermine the country’s position as a global financial leader.
In an Oct. 21 statement, Val Smith, head of payments and digital assets at the FCA, emphasized the need for strict regulations to protect consumers and preserve the financial market’s integrity. Smith stressed that lowering standards to encourage rapid innovation could lead to financial instability, saying, “Relaxing our standards won’t protect people or ensure our markets work well.”
Critics argue that the FCA’s high bar for crypto firm registration could limit the UK’s ability to lead in the financial sector. However, Smith countered that strong safeguards are essential to prevent illicit activities such as money laundering, terrorism financing, and organized crime from infiltrating the financial system.
Smith acknowledged the challenges crypto firms face when registering, but clarified that each application is rigorously evaluated to ensure firms meet essential standards. The FCA’s goal is to exclude bad actors from the financial ecosystem, not to reject applications “out of hand.”
The UK crypto community, represented by groups like CryptoUK, has pushed back against the FCA’s approach. They argue that the lengthy and resource-intensive registration process deters businesses from entering the market. Of the 35 crypto business registrations submitted in the past year, only four were approved.
Despite industry pushback, the FCA is committed to working with prospective crypto firms, offering pre-application meetings and support throughout the registration process. In a move to stay ahead in fintech, the FCA and the Bank of England launched a sandbox initiative on Oct. 1 to explore how blockchain technology can be used in the settlement and maintenance of financial securities.
By maintaining high regulatory standards, the FCA aims to ensure long-term success in the crypto industry while safeguarding the broader financial system.