UK Regulator Justifies Tough Crypto Crackdown Amid Industry Pushback

The UK financial regulatory agency sticks to its decision to continue implementing stringent rules in the registration process of businesses involved in cryptocurrencies.

The Financial Conduct Authority (FCA) asserted that UK’s tough regulations on crypto firms serve as a deterrence to prevent these companies from becoming conduits for any money laundering activities.

Strict Rules Necessary

The FCA upheld the strict registration process under the Money Laundering Regulations (MLRs), stressing that the regulations are vital to safeguard the integrity of the UK’s financial system.

In a statement, Val Smith, head of payments and digital assets in FCA’s authorizations division, said that the standards will set the stage for a thriving, competitive cryptocurrency sector that protects the people and the financial markets’ integrity.

Smith defended the MLRs from critics who argue that the rigorous regulations may stunt the growth of the UK’s cryptocurrency sector.

Dealing With Money Laundering Seriously

Smith said that the regulatory office aims to keep crypto firms from being conduits of money laundering activities even if the consequence is a lower number of crypto businesses getting registered.

“We never turn applications down out of hand. But we treat the risk of firms being used for money laundering extremely seriously. Allowing illicit money to flow freely can destroy lives,” Smith said.

He added that the MLR requirements help tackle “real-world issues” such as organized crime, terrorism, and human trafficking.

Smith explained that relaxing the government’s standards in crypto firm registration that creates “a race to the bottom” will not ensure the protection of the people and the markets, saying that “innovations built quickly on unsafe, unregulated and untrusted foundations” are like houses built on sand which will eventually collapse.

She said the regulator wants to closely collaborate with partners across government, industry, and other jurisdictions to develop a crypto sector that’s built on reliable, sturdy foundations.

“By doing this we can help enable safety, security, and sustainable growth for years to come.”

She noted that an essential part of a competitive crypto sector is to set and maintain standards that people can trust.

“That’s why we hold all firms seeking registration, not just crypto firms, to strong and universal standards.”

The financial watchdog has been implementing MLRs since January 2020 which require companies involved in crypto-related activities to register their business with the FCA.

MLRs required these companies to conduct risk assessments. They also need to implement due diligence on their customers and assign a Money Laundering Reporting Officer.

Regulating cryptocurrency-related activities is not endemic to the UK. Other countries are also taking necessary measures on their crypto sectors.

A good example is the European Union. The regional bloc has crafted the Markets in Crypto-Assets Regulation (MiCAR), aiming to establish a single cryptocurrency market which ensures the protection of its consumers and market integrity.

Singapore and Switzerland, on the other hand, have become crypto-friendly hubs as well, after implementing policies that promote and nurture cryptocurrency startups.

Featured image from LAB51, chart from TradingView