Under Rishi Sunak, the new Prime Minister of the United Kingdom, the Conservative Party had reportedly accepted and embraced cryptocurrencies.
However, the new regulatory framework expected to be introduced in the United Kingdom may make things difficult for foreign crypto service providers.
The new Regulatory Framework is Strict
The new framework will be tightening the scrutiny over the cryptocurrency industry and how it operates in the country.
With the new framework, the respective regulatory authority will gain more operating strength in the country. It will have more power and control over the cryptocurrency projects operating in the country.
However, the most concerning part of the new framework is that it may restrict the operations of foreign cryptocurrency firms within the jurisdiction.
If it is no complete restrictions, then there will be a limitation imposed on the foreign cryptocurrency firms who are and want to operate in the United Kingdom.
Why Introduce a Strict Regulatory Framework Now?
The reason behind the introduction of the new and strict regulatory framework in the United Kingdom is the FTX exchange.
With the crash of the FTX exchange, the entire crypto industry has been devastated. Investors have lost a great deal of confidence in the crypto industry and they are refraining from investing in cryptocurrencies.
Due to the FTX crash, regulatory authorities from all over the world are very concerned. They are trying to deal with the situation as actively as possible.
Their aim is to ensure that something of this sort never happens again. In case something like this happens, the funds of the investors remain safe and protected.
The reports claim that the UK Treasury is going to look into the entire framework and go through all the guidelines. They will be finalizing the package so it can be presented at the parliament for review.
The Financial Conduct Authority (FCA) of the United Kingdom will be the responsible regulatory authority watching over the entire regulatory implementation process.
The FCA will be responsible for monitoring the advertising and operations of companies operating and offering cryptocurrencies. It is important that all of these companies are based in the United Kingdom.
The framework may also restrict foreign cryptocurrency entities from offering cryptocurrencies and digital assets to the locals. They will not be allowed to offer cryptocurrencies in the UK market.
Foreign Crypto Firms to Register through FCA
As of yet, only a few specifics have been provided for the new regulatory framework. It is yet to be specified how foreign cryptocurrency firms will be treated in the United Kingdom.
There are speculations that foreign cryptocurrency firms may be required to get registered with the Financial Conduct Authority.
If they do not gain authority from the FCA, they may not be allowed to operate in the UK. It is a very concerning matter for foreign cryptocurrency firms because of the current rules in the UK.
According to the foreign cryptocurrency firms operating in the United Kingdom, the process is already very tough for approval.
As per statistics, the FCA already rejects 85% of the total approval requests received from foreign crypto firms.
It may become almost impossible for foreign crypto firms to acquire approval from the FCA to offer services in the United Kingdom.
Among the tests that the FCA conducts on each foreign crypto firm, the one with the highest priority is anti-money laundering (AML). Most of the firms end up failing the test so they are not approved.
Other Countries are Also Reacting
Following the FTX crash, regulatory authorities from all over the world have started to react.
Some of the most prominent regulatory authorities such as the US, Australia, Japan, South Korea, and more countries are tightening regulations against the cryptocurrency industry.
As a result of the regulatory tightening, the crypto industry may face a negative impact.