Is Your Crypto Exchange Safe? FCA Sounds Alarm Bells for 147 Exchanges in the United Kingdom!

The United Kingdom’s Financial Conduct Authority (FCA) made a significant move on October 8, adding numerous cryptocurrency exchanges to its warning list of non-authorized firms. The FCA’s warning list now comprises 147 entities, including major exchanges like HTX (formerly Huobi) and KuCoin. In this article, we will explore the latest developments regarding the FCA’s efforts to ensure compliance in the crypto industry, and the challenges faced by some firms in adhering to the new regulations.

The FCA’s Expanding Warning List

The FCA’s list of registered crypto asset providers remained unchanged since August, but on October 8, it underwent a significant update. A total of 147 new entities, including major exchanges like Huobi-owned HTX and KuCoin, were added to the warning list. While the warning list offers minimal details, it carries a clear message: “You should avoid dealing with this firm.”

UK Crypto Regulation Landscape

In the United Kingdom, companies wishing to engage in crypto asset activities must either be registered with the FCA or hold temporary status. Failure to comply can result in severe consequences, as outlined by Jayson Probin, crypto financial promotions lead at the FCA:

“We will take robust action against persons illegally promoting to UK consumers. This may include placing firms on our warning list, requesting takedowns of websites, social media accounts, apps, and all other promotions in breach, and enforcement action.”

As of August, the FCA disclosed that it had received 291 registration applications since 2020 but had granted approval to only 38, equating to a success rate of approximately 13%. At the time of publication, the FCA’s list of registered crypto asset providers includes 42 entities, including well-known names like Bitstamp, Revolut, and Gemini.

Impact on Major Players

The FCA’s regulatory actions have not gone unnoticed by major crypto exchanges. PayPal temporarily suspended crypto transactions for its UK customers as it works to ensure compliance with the FCA’s requirements. Similarly, Dubai-based Bybit ceased all its services in the UK in late September in response to “regulatory changes.”

Prominent exchanges like Binance and OKX have announced their commitment to complying with the UK’s new financial promotion regulations.

Binance’s Compliance Measures

Binance took proactive steps by launching a new domain for UK users and partnering with the local peer-to-peer lending platform Rebuildingsociety. Starting from October 8, UK retail users will be redirected to this localized domain, offering only products and services compliant with UK regulations. These include spot and margin trading, Binance Pay, its NFT marketplace, and loans.

However, certain products like gift cards, referral bonuses, academy, and research will no longer be available in compliance with the FCA rules. These changes solely affect retail users in the UK and not exempt users, including institutional and professional investors.

OKX’s Approach to Compliance

OKX, another major player, issued a statement on FinProm compliance on Oct. 6 and reduced its token offering to around 40 assets and implemented prominent risk warnings on its interface. The warning prominently states, “Don’t invest unless you’re prepared to lose all the money you invest,” emphasizing the high-risk nature of crypto investments. OKX also launched a dedicated U.K. account on Twitter (formerly X) to keep users informed about products and services that comply with the new UK regulations.

Challenges of Compliance

Crypto payment service MoonPay is also striving to adhere to the new FinProm rules. According to MoonPay deputy general counsel Matt Sullivan, the challenge lies in achieving compliance while operating globally. He stated that ensuring compliance requires localized product updates, new processes, and policies, as well as educating the entire company. Sullivan acknowledged that there may be an initial adjustment period, and views on the application of certain rules could evolve over time.

Non-Compliance Consequences

Some crypto firms, including KuCoin and HTX (formerly Huobi), appear to have struggled to comply with the new promotion rules in the UK. The FCA listed them among 147 entities described as “non-authorized firms” not allowed to operate in the country.

The FCA’s ongoing efforts to ensure regulatory compliance in the crypto industry are shaping the landscape for cryptocurrency businesses operating in the United Kingdom. Firms need to navigate the challenges associated with meeting the new financial promotion rules while providing transparent and safe services to consumers. Failure to comply with these regulations may result in serious enforcement actions, making it imperative for crypto entities to adhere to the established guidelines.