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The UK’s aspirations to establish itself as a global hub for cryptocurrency are being challenged by stringent Financial Conduct Authority (FCA) regulations and protracted approval processes. According to data obtained by the law firm Reed Smith through a Freedom of Information request, the FCA received only 29 applications for crypto-asset registration between May 1, 2023, and April 30, 2024. This is a significant decline compared to the 42 and 59 applications submitted in the two preceding years.
In Q1 2024, only seven applications were received—the joint second-lowest quarterly figure in the past three years. The average time for application approval over the last three years stands at 459 days, leading experts to question whether the FCA’s slow approval process is undermining the UK’s broader goal of becoming a leading global crypto hub.
A December report by the UK’s National Audit Office highlighted a skills shortage in the crypto sector, which caused delays in the FCA’s ability to register crypto-asset firms under money laundering regulations in 2021. The report also noted that the FCA continues to face challenges in recruiting and retaining staff with the necessary expertise.
Additionally, over the past three years, 186 firms have withdrawn their applications, suggesting that many are deterred by the FCA’s strict rules on financial promotions. Since the new financial promotion rules came into effect in October 2023, the FCA identified 1,010 breaches within the first seven months, up to April 2024.
Commenting on these findings, Brett Hillis, Partner at Reed Smith, expressed concern over the lengthy approval process, likening it to the time required to obtain a full banking license—a situation he described as “frankly astounding.”
“If we expect firms to seek full authorization as the regulatory perimeter expands, then something clearly needs to change to accelerate the process, especially if London wants to be a major center for digital assets,” Hillis stated.
He further warned that the decline in applications might indicate that crypto firms are growing impatient with the UK’s slow approval process and are beginning to explore opportunities in other, more crypto-friendly jurisdictions. “If firms perceive that another jurisdiction offers a quicker process and access to a market of comparable or even larger size, they won’t wait forever for approval. The UK risks losing its competitive edge to other nations that are more accommodating to the crypto industry,” Hillis cautioned.
The combination of stringent regulations and slow processing times poses a significant threat to the UK’s position in the global crypto market, as the country continues to face challenges from both within and abroad.
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