While UK regulators and banks have been spawning waves of anti-crypto action lately, their intention may be the exact opposite.
Instead, the latest crackdown could make the industry healthier, said Julian Sawyer, CEO of cryptocurrency exchange Bitstamp.
On Thursday, Sawyer joined Matthew Aaron’s Decrypt podcast to discuss the latest wave of crypto crackdown in the UK.
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Compliance as an afterthought
At the end of June, the Financial Conduct Authority (FCA), the UK’s main financial regulator, announced that Binance can no longer operate in the UK as Binance Markets Limited (the English branch of the exchange) had not registered with the UK. regulator.
However, instead of signing up, Binance has joined a long list of cryptocurrency companies that have simply shut down some of their services to British citizens.
FCA has received around 200 license applications from various cryptocurrency companies lately, but 180 of them, including Binance, eventually withdrew their applications, according to Sawyer.
“So what it’s showing is that the regulation is making organizations think about whether they want to operate within that jurisdiction. What is the cost, or hassle effectively, of checking your clients and making sure they have AML / KYC? “Sawyer said.” It is a burden on companies. We think it is the correct burden, but it is a burden. And you can understand why organizations are leaving.
One of the main reasons for such a massive recall could be that many cryptocurrency-related businesses did not have enough know-your-customer (KYC) and anti-money laundering (AML) procedures in the first place and suddenly had to catch up. day. comply.
For example, Sawyer pointed to his company, Bitstamp, which apparently built its business caral to be compliant from the ground up. As a result, the exchange’s clients had to undergo KYC / AML procedures from the beginning, otherwise they would not have been able to use the platform.
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“If you have never done any of this because you have a very different approach to compliance, you will have thousands of customers where you will have to start contacting them, get them after they start trading, after they have opened their account and got these AMLs and KYC, ”Sawyer explained.
And this process is “very, very expensive,” he added, because existing customers are not really motivated to undergo stricter verification procedures when they are already using a service.
A maturing cryptocurrency market
Traditional financial institutions are taking a similar position. For example, major UK banks such as Santander and Barclays recently blocked payments to Binance to “keep your money safe.”
However, that doesn’t mean they are “anti-crypto” in general, Sawyer said.
“It’s not the bank that says ‘we don’t like cryptocurrencies,’ it’s the bank that says, ‘We don’t like some actors, but we like regulated exchanges,'” Sawyer said. In this way, he added, the market is now separating the “bad players from the good ones” rather than seeing the entire cryptocurrency industry as imperfect.
At the same time, recent crackdowns have also shown that regulators may not have “all the teeth necessary to ensure the protection of UK customers,” Sawyer said.
This is because while the FCA may prohibit an exchange like Binance from operating in Britain, it cannot prevent UK residents from accessing the global exchange platform.
After specifically banning Binance Markets Limited, the FCA made it clear that ‘UK consumers can continue to interact’ with Binance Group as a whole.
” fact that the exchange is not regulated in the UK as a British entity does not prevent you from being a customer in Europe,” explained Sawyer.
“I think this is the beginning of an ongoing story about who’s good actors and who’s not, and what it means if you swap one over the other. Because there are big implications for that, “he concluded.
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