The Financial Conduct Authority (FCA) in the United Kingdom is standing firm on its strict registration process for crypto businesses, despite concerns that it may stifle innovation in the industry. In a blog post on October 21, Val Smith, the head of payments and digital assets at the FCA, defended the agency’s approach, stating that the FCA’s experts do not reject applications outright.

Smith emphasized the importance of setting and maintaining standards that people can trust in order to foster a competitive and thriving sector. She highlighted the risks of illicit activities such as terrorism, organized crime, and human trafficking, and warned against relaxing standards, which could lead to a “race to the bottom” in regulatory practices.

The FCA evaluates firms seeking registration based on their internal controls, overall operations, the individuals managing the firm, and the target customers. Smith explained that the decision to register a firm is not solely based on their controls and systems but also takes into account the operating environment and the people involved in the processes.

This defense of the FCA’s regulatory framework comes after the agency’s annual report revealed that out of 35 crypto applications received in the year ending March, only four firms were approved. This statistic indicates that over 87% of crypto registration attempts were either rejected, withdrawn, or denied, highlighting the challenges faced by new entrants in the UK crypto market.

The FCA’s commitment to combating money laundering and illicit activities in the crypto industry is evident in its stringent registration process. Despite concerns about hindering innovation, the agency believes that maintaining strong and universal standards is crucial for building trust and ensuring a competitive sector. Smith’s remarks underscore the FCA’s dedication to upholding regulatory practices that protect consumers and the integrity of the financial system.