UK regulator warns 111 unregistered cryptocurrency firms

The UK Financial Conduct Authority (FCA) has warned consumers not to deal with 111 cryptocurrency firms that are not registered with the FCA.

Since January 10, all cryptocurrency companies based in the UK have been required to comply with anti-money laundering and counter-terrorist financing laws and register with the FCA in order to operate legally. Many companies have not yet done so.

Speaking at City & Financial’s City Week event on June 22, FCA head of enforcement Mark Steward claimed that unregulated crypto entities pose a threat to consumers, banks, and payment firms that do business with them, stating:

"We have a number of companies that are clearly operating in the UK without being registered with us, and they are dealing with banks, payment services companies, consumers. It's a real risk, so we're concerned about that."

The FCA has compiled a list of more than 100 cryptocurrency companies that appear to be unregistered so that investors can double-check that the companies they intend to deal with are compliant.

Given the boom in cryptocurrencies in the UK, financial regulators appear to be particularly vigilant. According to the FCA’s own recent survey, 2.3 million UK adults now hold cryptocurrencies. However, there is a clear downward trend in investors’ overall understanding of the crypto assets they own.

Steward likened the cryptocurrency industry’s growth to the Dutch tulip mania of 1630, noting that fear of missing out (FOMO) is driving many to speculate in highly volatile assets.

“The reason many people are investing now is because they are afraid of missing out on a possible boom. Putting aside the volatility of these financial instruments, there is tulip mania everywhere.”

The United Kingdom’s strict anti-money laundering laws could hinder the operations of many unregistered companies, as Cointelegraph reported on June 4 that 51 crypto companies have withdrawn their registration applications with the FCA so far.

The UK government is actively working to curb crimes that use cryptocurrencies, such as money laundering and terrorism financing.

Earlier this month, the Metropolitan Police called for changes to legislation to allow authorities to deal with cryptocurrencies in a similar way to cash crimes, The Times reported.

Police reportedly called on the legislature to allow the freezing of cryptocurrency assets of businesses and individuals under police investigation, while also calling for strict regulations to make it more difficult for criminals to transfer cryptocurrencies.

FCA takes cautious approach

The FCA has taken a highly cautious approach to cryptocurrencies, with the government watchdog imposing a ban on crypto derivatives platforms in January while also warning investors of the risks associated with cryptocurrencies in the same month.

On January 10, 2021, the FCA was appointed as the regulator for anti-money laundering and counter-terrorist financing measures. From this day on, all crypto asset companies headquartered in the UK must comply with anti-money laundering regulations and register with the FCA.

Firms operating before January 10 this year had to apply for the Provisional Registration Regime (TRR), which allows firms to continue trading while the FCA conducts an assessment of their formal registration.

Due to a backlog of applications caused by the global pandemic, which is still being processed, the FCA announced on June 3 that the deadline for provisional registration has been extended from July 2021 to March 2022.