The United Kingdom’s Financial Conduct Authority (FCA) has defended its approach to regulating the crypto industry, responding to criticism that its measures are “too tough” and risk stifling innovation.
In an Oct. 21 post on its website, Val Smith, the head of payments and digital assets in the FCA’s authorizations division, emphasized the importance of maintaining rigorous standards to protect consumers and preserve the integrity of financial markets.
“Relaxing our standards and creating a race to the bottom also won’t ensure people and our markets are protected or even work well.”
Smith wrote that innovations quickly built on “unsafe, unregulated and untrusted foundations” will likely collapse.
UK crypto standards
While some critics argue that the FCA’s high bar for crypto firm registrations could hinder the UK’s ambition to become a global financial leader, Smith pushed back, saying the agency’s approach is essential for long-term success.
“Allowing illicit money to flow freely can destroy lives,” she said, highlighting the real-world dangers the FCA is working to prevent, including terrorism financing, organized crime and human trafficking.
Smith acknowledged that the number of registered crypto firms has been a point of contention but stressed that no application is rejected “out of hand.”
Instead, she highlighted that the FCA evaluates each firm against a comprehensive set of criteria, including its controls against financial crime, its operating environments, and the customers it aims to serve.
According to Smith, this thorough vetting process is a necessary measure to keep bad actors out of the financial system.
Related: From landfill to lawsuit: James Howells’ quest to reclaim lost Bitcoin
Community pushback
However, the local crypto community has been pushing back, calling the agency’s regulatory process a “deterrent” to the industry.
On Sept. 12, CryptoUK, a self-regulatory trade association for the UK crypto industry, said that some members have “expressed reluctance” about the FCA’s registration process, calling it lengthy and difficult.
CryptoUK pointed out that UK regulators have only approved four of the 35 crypto business registrations in the last year.
“The application is a huge ask in terms of resources, people and finances,” a CryptoUK spokesperson told Cointelegraph.
Regulatory developments
Despite challenges, Smith said the FCA remains committed to working with prospective crypto businesses and offers pre-application meetings and practical support throughout the registration process to help firms meet the required standards.
The FCA and the Bank of England continue to push ahead in the emerging tech industry. On Oct. 1, they jointly launched a sandbox initiative to explore how digital ledger technology can be used in the notary, maintenance, and settlement of financial securities.
AI Eye: Insane Satoshi podcast created in seconds, Crypto + AI outperform memecoins