Slow FCA processing at odds with UK’s crypto ambitions — Report

The United Kingdom’s Financial Conduct Authority (FCA) takes over a year to process a crypto asset exchange or custodian wallet provider’s registration application, based on an average of wait times over the past three years, law firm Reed Smith determined. After a slew of application withdrawals, few new ones are being received.

Reed Smith made a Freedom of Information request to obtain three years’ worth of data for a survey of FCA activities, the Financial Times reported.

FCA may not prioritize applicants

It has taken an average of 459 days to process a crypto firm’s registration in the last three years. The agency has spent 25 years of manpower on the applications, the law firm discovered. While the agency is picking up its pace, the long wait has implications, Reed Lewis partner Brett Hillis said:

 “It does seem that even though approval times are falling, the time taken to grant approval remains something of a drag on the UK’s broader ambition to become a crypto hub.”

The long processing time does not mean the agency has been inactive on the crypto front. Since the new rules on crypto asset promotion came into force in October 2023, the FCA has issued application extensions and repeated guidance.

The FCA has enforced the new rules vigorously, although the UK National Audit Office criticized the agency’s enforcement efforts in a December report. It noted that the agency may lack enough qualified staff for effective enforcement.

Related: FCA crypto regulators will take the best from TradFi and DeFi, says exec

The applicant pool is drying up

The FCA is seeing progressively fewer crypto firms apply for registration. In the first quarter of 2024, there were seven applicants, with a total of 29 applications filed between May 2023 and April 2024. That compares with 42 applicants in the previous year’s span, and 59 in the year before.

Meanwhile, 186 forms withdrew their applications in the three-year window. The declining number of applicants may be a mixed blessing, Hillis said:

“If it’s the case that applications are falling because crypto firms have essentially given up waiting and started looking abroad, this should send a clear warning about London’s competitiveness.”

 “The good news is that the falling number of applications suggests that firms are now much better acquainted with what the regulator expects,” Hillis added.

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