90% of UK crypto exchanges FCA authorisation apps withdrawn or refused
What has happened?
In December 2021, it was reported in the financial press that the FCA chief executive Nikhil Rathi had stated before the Treasury Select Committee on Wednesday 8 December that around 90% of authorisation applications from UK crypto exchanges are either "withdrawn or refused".
What are the regulators saying?
Nikhil Rathi was quoted as saying that "We see a serious link to money laundering and serious organised crime being propagated through crypto exchanges and a culture in many of those organisations that does not respond to the level of systems of controls that we would need from those firms as they are growing."
He defended the application approval process after it was said that, in some cases, an application can take months when it should only take a matter of days. He highlighted also that crypto exchanges, in particular, are an area of concern for the regulator and was quoted as stating that "Some of these crypto assets we do not believe have intrinsic value. They have been a vector for serious organised crime and money laundering, and anyone invested in them must be ready to lose all their money”.
Rathi also stated that the FCA is expecting new powers in terms of regulating crypto advertisements.
Earlier, FCA chairman Charles Randell had expressed concern over the wordings of the Floki Inu token advertisement on London buses but had admitted that nothing much can be done beyond cautionary warnings for consumers.
Nikhil Rathi also said that the FCA is considering not permitting any requests for compensation under the Financial Services Compensation Scheme if investors lose money in cryptocurrencies, commenting “Personally, I would suggest we simply say that anything crypto-related should not be entitled to compensation, so that consumers are clear about that when they are investing.”
In July 2021, the Advertising Standards Authority had issued a red alert about deceptive crypto advertising, particularly promotions of cryptocurrencies and non-fungible tokens, and had warned consumers to be wary. This was repeated in November when the ASA stated;
……We’re currently investigating a number of crypto-asset ads across different media, where we have concerns about:
- lack of appropriate risk warnings
- the trivialisation of investments in cryptocurrency
- ads taking advantage of consumers’ inexperience or incredulity [sic]
- irresponsible advertising (for example, creating a sense of urgency to invest).
We’ll be providing clarity around our expectations of crypto-asset advertising through these rulings, which we expect to publish in mid-December. We'll then carry out proactive monitoring and enforcement to tackle non-compliant ads for crypto-assets.
How can we help you?
If you’d like to know more about how we can help you with your cryptoasset FCA application arrangements or financial promotion issuance, or with any other regulatory compliance issues, our specialist financial crime and crypto team is here to help.
Contact us today on 0207 436 0630 or email info@thistleinitiatives.co.uk.