UK National Audit Office Criticizes FCA’s Slow Response to Crypto Industry Regulation

The National Audit Office (NAO) in the UK has expressed concern over the Financial Conduct Authority’s (FCA) efficiency in regulating the cryptocurrency sector. A recent NAO report, “Financial services regulation: adapting to change,” criticizes the FCA’s slow response to illegal activities in the crypto field. It took nearly three years for the FCA to act against unlawful crypto ATM operators. On July 11, Cointelegraph reported that the FCA closed 26 crypto ATMs after an investigation. The NAO noted that, although the FCA required crypto firms to follow anti-money laundering rules from January 2020 and started supervising and engaging with unregistered firms, enforcement against illegal crypto ATM operators only began in February 2023.

The NAO attributes the FCA’s delay in registering crypto companies seeking approval to a lack of specialized crypto staff. The report mentions that a shortage of crypto expertise led to extended timeframes for registering crypto-asset firms under money laundering regulations. On January 27, Cointelegraph reported that since January 2020, when the rules came into effect, the FCA had approved only 41 out of 300 applications from crypto firms.

Additionally, the FCA has recently issued guidance to help crypto firms understand new rules on crypto promotions. On November 2, Cointelegraph reported that the FCA published “finalized non-handbook guidance” for complying with these new regulations. These rules particularly pertain to the ways crypto firms can promote their services to customers, addressing issues like firms making claims about the ease of using crypto without adequately highlighting risks and the insufficient visibility of risk warnings due to small font sizes.

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