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The UK Leaves New Crypto Businesses Stranded in 2021
By Shane Addinall Dec 22, 2020 TechnologyTo address the current backlog of cryptoasset business applications in the UK the FCA has effectively shut the market to new players. Will the Isle of Man offer an exciting alternative to the tightly regulated British market?While blockchain technology and cryptocurrency valuations are lauded as the new Wild West the reality of doing business in key markets such as the United Kingdom and European Union is far more pedestrian.
Any new cryptocurrency-related business looking to legally manage crypto assets and operate out of the UK will need to be approved by the Financial Conduct Authority (FCA) and be recognised as being fully compliant with the 5th Money Laundering Directive (5MLD).
FCA Fails to Meet Its 2020 Quota
Citing ongoing issues with the complexities of the submissions received and the ongoing delays caused by national lockdowns during 2020 the FCA has reportedly only managed to onboard less than five new crypto businesses, leaving more than 150 applications untouched.
The problem with this enormous processing backlog is that in their hubris the FCA initially stated that any crypto-asset related enterprise not approved by themselves and found to be 5MLD compliant must cease all trading by January 10th, 2021.
They have since recognised their inability to meet this deadline and as such introduced the Temporary Registration Regime. This program was put in place to serve existing crypto-asset companies who applied for review before December 16th, 2020.
The newly implemented Regime will allow these companies to avoid a shutdown and allows them to continue trading until July 9th, 2021. The FCA claims that they will have addressed the years backlog and last-minute applications by that time.
However, given the fact that the UK has gone into a new round of lockdowns and the overwhelming number of applications that would need to be approved in less than 6 months, these business owners are rightly concerned about not being approved in time and what impact that will have on their ability to continue trading in 2021.
Is the Isle of Man an Option in 2021?
While the Temporary Registration Regime was a relief for existing crypto businesses it has resulted in the FCA announcing that no new business applications will be considered until the backlog has been addressed.
This could see no new UK crypto-asset firm registrations taking place until after July 2021, a death knell to any startup which was just not able to apply for review before the December 16th cut off.
This is where the Isle of Man could be the saving grace for the industry. Their Designated Business (Registration & Oversight) Act of 2015 allows for the creation of new crypto-facing businesses in the region:
“The business of issuing, transmitting, transferring, providing safe custody or storage of, administering, managing, lending, buying, selling, exchanging or otherwise trading or intermediating convertible virtual currencies, including crypto-currencies or similar concepts where the concept is accepted by persons as a means of payment for goods or services, a unit of account, a store of value or a commodity.”
Rather than looking to assert tight-fisted control over the fledgeling industry the region has taken a crypto-friendly approach which is aimed at encouraging investment and new business development.
With the UK closing its doors to new businesses the Isle of Man could become a growth hub for the industry, perhaps even drawing major players away from the UK. It will be interesting to see how both the UK and the Isle of Man woo market leaders and new business in 2021.
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