The UK financial watchdog’s new crypto register is surprisingly empty as crucial deadline looms

When the Financial Conduct Authority took over as the anti-money laundering and counter-terrorist financing supervisor of UK crypto companies on January 10, 2020, it warned that businesses not registered by the same date the following year would have to cease trading.

Now, with the deadline only two months away, some in the industry are growing concerned at what appears to be a substantial backlog in the registration process.

There are currently just three names on the UK watchdog’s register of regulated crypto firms: the crypto payments app Ziglu and the exchange operators Archax and Gemini. Industry insiders say this trio represents only a fraction of the total number of companies that have applied to be on the list.

“What you see is the tip of the iceberg, I suspect,” said Oliver von Landsberg-Sadie, chief executive of BCB Group, which provides payment services to crypto firms.

Four UK businesses — a BCB subsidiary, the crypto investment firm eToro, the Kraken-owned derivatives exchange Crypto Facilities, and Wirex, the crypto multi-currency account provider — told The Block they had applied for authorization earlier this year.  

“It is surprising to see so few firms having achieved registration so far,” said George Morris, a partner at the law firm Simmons & Simmons. 

It’s also not clear exactly what is causing the hold-up.

In January, the FCA advised companies that submitting their applications as early as possible would improve their prospects of getting registered prior to the January 10 cutoff. The regulator later issued a notice that crypto operators should apply by June 30, to ensure that applications would be processed on time.

Once the FCA has all the information it requires, it has up to three months to assess completed applications. Still, Morris suspects that a “significant number” of firms applied for registration on or before the FCA’s soft deadline of June 30.

Pavel Matveev, chief executive of Wirex, said his business submitted its application in April and is expecting to be registered imminently. He speculated that an unexpectedly high volume of applications, coupled with the Covid-19 pandemic and the looming end of the UK’s transition period with the European Union, could be causing delays.

Another person with knowledge of the application process, who wished to remain anonymous, said they had witnessed the regulator take more than 12 weeks to assign a case officer to a company after it had submitted its application.

The FCA was contacted for comment but did not respond before press time.

So many questions

What’s going on behind the scenes at the FCA?

Morris pointed out that the three companies that have been able to achieve registration happened to also be in the process of applying for additional, broader authorizations from the FCA. Ziglu and Gemini clinched e-money licenses, while Archax received Multilateral Trading Facility and custodial licenses.  

Having multiple pending applications may have accelerated the process for these companies, given that “none of the crypto asset businesses that are applying only for registration have yet been registered,” Morris said.

Perhaps the most important lingering question is whether the FCA will grant crypto businesses any leeway if their applications have not been processed by the time January 10 rolls around. Multiple market insiders told The Block that they expected the regulator to give at least some firms a grace period. 

Matt Pollard, chief financial officer of Archax, said firms that have not been authorized by January “will need to have robust dialogue with the FCA in place should they wish to try to continue to operate after the deadline without being formally on the register.”

“I would expect to see a pragmatic response from the regulator where appropriate, but the focus will rightly be on consumer protection before giving this out to firms that have not yet successfully obtained crypto-asset designation,” he added.

The real kick in the teeth for crypto companies in limbo is that, in September, one UK business snuck onto the crypto register quite by accident.

Storm Fitness Academy, which offers personal training courses in Brighton and has absolutely nothing to do with cryptocurrency, briefly cropped up on the list in late September. Business owner Johnathan Bond told the Block at the time that he was nonplussed by the listing, which was later removed.