Crypto companies are increasingly turning away from Britain, citing burdensome and time-consuming regulatory processes as a key factor, the Financial Times reported, citing law firm Reed Smith.
Registrations for crypto asset exchanges and custodial wallet providers with the UK’s Financial Conduct Authority (FCA) have fallen by more than 50% in the past three years, indicating growing frustration with the country’s regulations.
Sharp drop in the number of applications
A Freedom of Information (FOI) request from law firm Reed Smith revealed that the FCA received just 29 registration applications between May 2023 and April 2024. This represents a sharp decrease compared to the 42 applications in the previous year and 59 the year before.
Meanwhile, there were just seven applications in the first quarter of this year, one of the lowest quarterly totals in three years. This significant drop indicates that crypto companies are becoming increasingly frustrated with the FCA’s processes, which are seen by many as extremely slow and complex.
The UK regulator’s average approval time for crypto registration applications is 459 days, with some companies waiting more than two years for a decision. This lengthy process has led to a growing exodus of crypto companies seeking more efficient regulation abroad.
Since 2020, the FCA has processed more than 300 applications, yet only 45 firms have successfully obtained approval, which equates to an acceptance rate of around 15%.
Great Britain unattractive for crypto
Critics have increasingly argued that the FCA’s strict criteria and rigorous oversight have made the UK an unattractive destination for crypto companies. Many, including some of the largest centralized exchanges, have chosen to seek more accommodating countries for their operations.
Many businesses have raised concerns that Britain is applying outdated regulatory frameworks to a rapidly evolving industry, stifling innovation and driving companies towards more crypto-friendly jurisdictions. This trend threatens Britain’s ambitions to establish itself as a global hub for digital assets.
Law firm Reed Smith’s FOI request also revealed that 186 firms had withdrawn their applications in the past three years. Although withdrawals have fallen by 78% over the past year, the overall trend illustrates the challenges posed by the FCA’s regulatory approach.
The FCA has defended its cautious approach, emphasizing the importance of market integrity and consumer protection over the speed of processing applications. However, growing frustration within the sector suggests that without significant reforms, Britain could continue to lose its competitive advantage in the global crypto market.
