The National Audit Office (NAO) has expressed concerns regarding the efficacy of the Financial Conduct Authority (FCA) in overseeing the cryptocurrency sector in the United Kingdom. In its recent report titled “Financial services regulation: adapting to change,” the NAO criticized the FCA for its slow response to and action against illicit activities within the crypto industry.
Specifically, the NAO pointed out that it took nearly three years for the FCA to address illegal operations involving crypto ATMs. A coordinated investigation by the FCA led to the shutdown of 26 crypto ATMs on July 11. The NAO report highlighted that while the FCA had mandated compliance with anti-money laundering regulations for crypto-asset firms since January 2020, it did not commence enforcement actions against illicit crypto ATM operators until February 2023.
The delay in registering crypto firms seeking regulatory approval was attributed to a lack of specialized personnel with crypto expertise. The report stated that “a shortage of crypto skills meant the FCA took longer than planned to register crypto-asset firms under money laundering regulations.”
Earlier reporting indicated that, as of January 27, the FCA had approved only 41 out of 300 crypto firm applications seeking regulatory approval since the implementation of rules in January 2020.
In recent developments, the FCA released guidance materials to help crypto firms understand the new crypto promotion rules that came into effect. These rules are designed to govern how crypto firms can promote their services to customers. The FCA addressed issues such as firms making claims about the ease of using crypto without adequately highlighting associated risks and risk warnings not being sufficiently visible in small fonts.
