Crypto companies are increasingly choosing to avoid the UK, citing cumbersome and time-consuming regulatory procedures as a key reason, according to the Financial Times reported , citing law firm Reed Smith.

The number of crypto asset exchange and custodian wallet providers registering with the UK's Financial Conduct Authority (FCA) has decreased by more than half in the last three years, indicating growing discontent with the country's regulatory landscape.

Sharp decline in applications

A Freedom of Information (FOI) request by law firm Reed Smith revealed that between May 2023 and April 2024, the FCA received just 29 registration applications. This represents a sharp decrease from the 42 applications received in the previous year and 59 the year before that.

During the first quarter of this year, only seven applications were submitted, marking one of the lowest quarterly figures in three years. This significant decline suggests that crypto firms are increasingly frustrated with the FCA's procedures, which many perceive as excessively slow and complex .

The UK regulator’s average approval time for crypto registration applications stands at 459 days, with some firms waiting for over two years for a decision. This extended process has led to a growing exodus of crypto businesses seeking more efficient regulatory environments elsewhere.

Since 2020, the FCA has processed over 300 applications, but only 45 firms have successfully obtained approval, reflecting an acceptance rate of approximately 15%.

UK unattractive for crypto

Critics have increasingly argued that the FCA’s strict criteria and thorough scrutiny have made the UK an unappealing destination for crypto firms. Many, including some of the largest centralized exchanges, have chosen to seek more accommodating shores for their operations.

Many companies have voiced concerns that the UK is applying outdated regulatory frameworks to a rapidly evolving industry, which stifles innovation and compels firms to seek more crypto-friendly locations. This trend threatens the UK’s ambitions to become a global hub for digital assets.

The FOI request by law firm Reed Smith also revealed that 186 firms had withdrawn their applications over the past three years. Despite a 78% decrease in withdrawals last year, the overall trend highlights the challenges presented by the FCA’s regulatory approach.

The FCA has defended its cautious stance, emphasizing the need for market integrity and consumer protection above the pace of application processing. However, the rising discontent within the industry suggests that without significant overhauls, the UK might continue to lose its competitive advantage in the global crypto market.