An unprecedented number of companies in the UK dealing in cryptocurrencies are facing closure for not adhereing to the UK’s anti-money laundering rules.
On Thursday, the Financial Conduct Authority in the UK announced that a large number of companies dealing in cryptocurrencies in the UK had withdrawn applications from a temporary permit scheme that permits companies to trade cryptocurrencies as the FCA assesses them to decide whether to give them a green light to continue with their operations or reject their applications.
According to the announcement, a good number of those companies had fallen short of the anti-money laundering rules and had been warned.
The anti-money laundering rules were put in place to stop terrorists and criminals from hiding their financial transactions by trading or transacting using cryptocurrencies and firms or companies that of the permit process should stop their operations immediately until they meet the required threshold and the FCA lists them as regulated businesses.
If a company withdraws from the temporary permit scheme and refuses to close immediately, it could face legal action or fines by the FCA.
Regulators around the world are toughening their stance on cryptocurrencies
This development comes amid a heightened crackdown by several regulatory authorities across the globe to try and clamp down on crypto assets that are linked to black market dealings, terrorism, and money laundering.
Last month, the Chinese regulator banned payment firms and banks from offering any crypto-related services to their clients as it warned of the risks involved with trading cryptocurrencies.
In November 2020, the US government seized over $1 billion worth of bitcoins connected to Silk Road, a closed darknet marketplace.
Also, the UK scheme that helps investors reclaim funds after fraudulent companies go bust does not cover crypto assets and Andrew Bailey, the governor of the Bank of England, warned crypto investors to be prepared to lose all their funds after investing in cryptocurrencies.
A limited number of companies have made it to the FCA’s formal register so far
At the moment, only 5 cryptocurrency dealing companies have been admitted to the formal register as regulated businesses by the FCA.
There are another 90 companies that are currently under assessment and operating under the temporary permit scheme that has been extended by 9 months to allow the FCA more time to complete reviewing all the applications before it.
51 companies are the ones that have withdrawn their applications to the FCA for assessment. And although some of them have withdrawn since they do not require FCA approval to conduct their businesses, there is still a considerable number that may face closure after the withdrawal to either reorganize or reapply to be admitted to the formal register or just close for good.