UK FCA Chief Warns Against Judging Crypto Firms by Size for Approval Decisions

The Financial Conduct Authority has turned down some of the largest crypto firms in the world in the last two years, its CEO Nikhil Rathi told lawmakers at a hearing.

AccessTimeIconJul 19, 2023 at 4:54 p.m. UTC
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The U.K. Financial Conduct Authority (FCA) is not swayed by the size of crypto companies when granting regulatory approval, its CEO Nikhil Rathi told lawmakers at a Treasury Select Committee hearing on Wednesday.

The FCA is in charge of registering and overseeing crypto companies that wish to operate in the country under existing anti-money laundering requirements. The financial regulator has received over 300 applications from crypto firms since opening its register two years ago but only 42 firms have managed to register with the regulator so far.

"We went through a very tough period with the industry over the last 18 months or two years because we turned down applications from some of the largest crypto firms in the world," Rathi said during the hearing. In 2021, the FCA famously judged that Binance, the world's largest crypto exchange by trading volume, was not capable of being supervised.

"And we did that not because we were anti-innovation but because we were given a job to make sure money laundering standards were met and they could not convince us that they were meeting them, so we turned the application[s] down because we want clean markets here," Rathi continued.

He also warned against regulators considering the size of the firm and market share when assessing applications for registration.

"There are some people that will try and suggest we should have a metric for market share and I just encourage everybody to think really hard about whether you really want a regulator to be talking about metric because that would give a bias towards larger companies," Rathi said.

Instead, he wants regulators to make "robust decisions" when authorizing firms.

The U.K. could soon see a new authorization regime for crypto firms, which would require all companies wishing to operate in the country to apply for a FCA license – including oversees firms reaching out to local customers. The FCA was given more powers to regulate the crypto industry and ensure consumer protection when the country's new markets bill passed into law in June, and more crypto rules are expected to follow.

Edited by Sandali Handagama.


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Camomile Shumba

Camomile Shumba is a CoinDesk regulatory reporter based in the UK. She previously worked as an intern for Business Insider and Bloomberg News. She does not currently hold value in any digital currencies or projects.

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