FCA Defends Stringent Crypto Firm Registration Process Despite Innovation Concerns

The FCA is defending its stringent crypto firm registration process despite concerns that the approach may hinder innovation.

The Financial Conduct Authority (FCA) has defended its stringent registration process for crypto firms amid concerns that the approach could stifle innovation in the sector.

“We know that setting and maintaining standards people can trust is a key part of any thriving, competitive sector. That’s why we hold all firms seeking registration, not just crypto firms, to strong and universal standards.”

Val Smith, Director of Supervision, Retail and Authorisations at the FCA

Speaking at the Crypto and Digital Assets Conference in London on Wednesday, Val Smith, Director of Supervision, Retail and Authorisations at the FCA, addressed concerns over the potential for illicit activities to take place within the crypto sphere.

Highlighting the risks of terrorism, organized crime, and human trafficking, Smith warned against any relaxation of standards, suggesting it could initiate a “race to the bottom” in regulatory practices.

“We have a responsibility to make sure the standards in the UK remain high, and we won’t compromise on that. If we start relaxing the standards for crypto, we’ll end up in a race to the bottom, which ultimately harms consumers and the sector itself.”

The FCA official also touched upon the regulator's evaluation processes for crypto firms seeking registration.

According to Smith, the FCA doesn’t just assess a firm's controls and systems but also considers the operating environment, key individuals, and the customers the firm aims to reach.

“Our decision on whether to register isn’t just based on the controls and systems firms have in place. We look at the environment they operate in, the people involved in these processes and the customers they want to reach.”

The comments come as the FCA faces increasing pressure to speed up the registration process for crypto firms.

Earlier this year, the regulator was accused of moving “at a snail's pace” in granting registrations, with only a handful of firms having been approved despite over 300 applying.

However, the FCA has maintained that it will not rush the process and that it is taking the time necessary to ensure that only firms meeting the required standards are granted registration.

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