Crypto Exchanges Face an Uphill Battle for EU Approval

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As European regulators crack down on unlicensed crypto exchanges, getting approval is proving difficult.

Last week, for example, De Nederlandsche Bank (DNB), the Dutch central bank, announced that it had fined crypto exchange Coinbase $3.325 million (approximately $3.6 million) for operated in the country without a license before the company received one in September last year.

The sanction follows a similar fine that DNB imposed on Binance in July, as the company continues to operate in the country without the necessary permits.

Overall, DNB has granted only a small number of authorizations, and the latest fines demonstrate the difficulties crypto businesses face in the absence of an EU-wide passport for licenses of cryptography, a problem that should be solved with the passage of the EU for a long time. Expected settlement in Crypto Asset Markets (MiCA) this year.

However, this does not solve the problem in the UK, as companies wishing to offer their services in the country will need to obtain further approval from the Financial Conduct Authority (FCA).

And as the financial regulator revealed this month, only 41 of the 260 crypto-asset firms that applied for registration in January were approved, accounting for just 15% of the total number of applications received. For the remaining 85% of companies that either withdrew their application or had it rejected, the FCA provided feedback on what it considers a good application.

Extend surveillance beyond anti-money laundering

As it stands, European regulatory sanctions have been administered on the basis of anti-money laundering (AML) legislation. For example, in the Netherlands, the DNB is the authority responsible for ensuring that crypto businesses comply with the relevant AML laws, while the FCA has a similar obligation in the UK.

Under the MiCA, EU regulators will have an expanded oversight mandate that will bring the majority of crypto-asset services to a regulatory standard comparable to that of the traditional financial sector, with rules in place for the protection of consumers, the prevention of tax evasion as an improved AML framework.

Meanwhile, in 2023, the UK is set to diverge from the EU on crypto regulation.

For example, although the Financial Services and Markets Bill (FSMB), which is currently in parliament, will give the FCA greater leeway to regulate crypto businesses beyond AML, this will be largely limited to stablecoins, as the country has yet to develop a MiCA-style legislative instrument dedicated to the sector.

That’s not to say UK policymakers haven’t shown interest in new legislation.

In fact, as part of a broad investigation into the nation’s crypto asset sector, the Treasury Committee engaged with the FCA and key stakeholders on industry developments, including a parliamentary meeting in December. latest on the ramifications of the FTX scandal and its effects on UK consumers. .

In response, Sarah Pritchard, executive director of markets at the FCA, said the regulator was genuinely concerned that consumers engaging with crypto platforms were not sufficiently educated about the risks involved.

Additionally, while the FCA issued a warning about illegal FTX operations in the country before its collapse, Pritchard reminded the parliamentarians present that the regulator is limited because its consumer protection mandate does not currently extend to the sector. of cryptography.

Similarly, Matthew Long, director of payments and digital assets at the FCA, noted that had the FCA been given an expanded range of powers to regulate the digital asset space, the financial watchdog would have been in a better position to repay. investors who have lost funds. in the exchanges collapse.

If it was in the settlement, we would have a liquidation plan where we would consider the investments of each of these peoples and make plans for their repayment to be properly accounted for, Long told the parliamentary committee.

For now, members of the Treasury Committee seem to have taken notice, expressing concern that the sector is currently under-regulated and that new legislation will be needed to protect consumers in the future.

For example, in a response to the FCA’s recently announced data on crypto firm app approvals, committee chair Harriet Baldwin acknowledged that a review of statistics and an ongoing investigation into crypto regulation did not disabuse us of the impression that parts of this industry are a Wild West.

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See More In: AML, Anti-Money Laundering, Binance, coinbase, Crypto Exchange, cryptocurrency, EMEA, EU, FCA, Financial Conduct Authority, Financial Services and Markets Bill, FTX, Markets in Crypto-assets, MICA, News, uk

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