Crypto exchanges face uphill battle to gain EU approval

Getting approval is proving difficult as European regulators crack down on unlicensed crypto exchanges.

For example, last week, the Dutch central bank, De Nederlandsche Bank (DNB), was charged €3.325 million (approximately announced a fine of $3.6 million. September of last year.

The penalty follows a similar fine DNB imposed on Binance in July for continuing to operate in the country without the necessary permits.

Overall, DNB has granted only a handful of permits and the latest fines demonstrate the difficulties crypto companies face in the absence of EU-wide passports for crypto licenses. – The long-awaited Crypto Asset Market (MiCA) regulation this year.

However, the UK challenge remains, as companies wishing to offer services in the UK must obtain further approval from the Financial Conduct Authority (FCA).

And as financial regulators revealed earlier this month, out of 260 cryptocurrency businesses that applied for registration as of January, only 41 were approved, just 15% of the total number of applications received. . For the remaining 85% of companies that have withdrawn or rejected their applications, the FCA has provided feedback on what constitutes a ‘good’ application.

Expanding Surveillance Beyond Anti-Money Laundering

As it stands, European regulatory penalties are governed under Anti-Money Laundering (AML) legislation. For example, in the Netherlands the DNB is the body responsible for ensuring that cryptocurrency businesses comply with relevant AML laws, while in the UK the FCA has similar duties.

Under MiCA, EU regulators will put regulations in place for consumer protection, anti-tax avoidance, as an enhanced AML framework, to bring the majority of cryptocurrency services up to par with the traditional financial sector. You will have expanded supervisory powers to raise the bar.

Meanwhile, in 2023, the UK is set to leave the EU on cryptocurrency regulation.

For example, the Financial Services and Markets Bill (FSMB) currently before Congress gives the FCA greater scope to regulate cryptocurrency companies beyond AML, but it is largely limited to stablecoins, The country has not yet developed MiCA. Sector-specific legislative instruments.

That’s not to say that UK policymakers aren’t interested in further legislation.

Indeed, as part of a broader look into the country’s crypto sector, the Finance Committee has engaged with the FCA and key stakeholders on industry developments. .

In response, FCA Executive Director of Markets Sarah Pritchard said regulators were “very concerned” that consumers involved with crypto platforms were not fully aware of the risks involved. Stated.

Moreover, while the FCA issued warnings about illegal operations in the country before the collapse of FTX, Pritchard told lawmakers that consumer protection powers currently do not extend to the cryptocurrency sector, so regulators should reminded me that is limited.

Similarly, Matthew Long, the FCA’s Director of Payments and Digital Assets, said that if the FCA expands its powers to regulate the digital asset space, the financial watchdog will pay back investors who have lost money. pointed out that it would have been in a better position for With the collapse of the exchange.

“If it were regulated, we would have a step-by-step plan to consider each of these people’s investments and make plans to properly consider their repayments,” Long told a parliamentary committee. Told.

For now, members of the Finance Committee appear to be paying attention, expressing concern that the current sector is poorly regulated and that more legislation will be needed to protect consumers going forward. increase.

For example, in response to the FCA’s recently released data on the approval of cryptocurrency companies’ applications, Commission Chairman Harriet Baldwin said that a review of statistics and continued research into cryptocurrency regulation meant that “some of this but the industry is the “Wild West”. ”

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