Regulating Cryptocurrencies – Wirex CEO’s View
The global adoption of crypto has exploded in recent years with Statista estimating that there are over 70 million crypto wallet holders worldwide. Here at Wirex, we’ve just surpassed 3.5 million customers across 130 countries.
Since establishing the company in 2014, my co-founder, Dmitry Lazarichev, and I have always seen the digital economy as the future of finance. We created Wirex to bridge the gap between the traditional and digital economies, offering easy and safe access to the benefits of crypto, including low-cost, transparent and fast transactions, within a mainstream financial product. We consider ourselves as ‘crypto-friendly’; we’ve worked closely with existing and reputable payment partners offering traditional currencies, whilst facilitating emerging digital currencies, to develop a unique value proposition that addresses real user needs.
Nevertheless, with the mainstream adoption of crypto on the horizon, there’s no doubt that it comes with its teething problems. It’s vital that blockchain adoption scales sensibly and compliantly, to ensure it’s a long-term solution to financial needs, rather than a short-term fad.
Growing Need for Regulatory Crypto Frameworks
Released a few weeks ago, The Kalifa Review cemented the UK’s path in becoming a ‘Global Britain’ for fintech. For the UK to maintain its position as a global fintech hub, we believe that that it’s vital that it embraces crypto-friendly businesses. We have already seen many countries such as Singapore create solid regulatory frameworks for crypto, and we encourage similar regulatory clarity and continued dialogue with the UK’s regulatory bodies.
Recently, the UK’s Financial Conduct Authority (FCA) has increased its surveillance of all financial businesses to address financial crime. Crypto-related firms are no exception. P2P Finance News recently highlighted how the FCA has increased its monitoring of potential scams, unauthorised firms and unlawful promotions, with two of their biggest sanctions over the past year relating to failure to address AML risks.
In line with this, the FCA increased their oversight of crypto back in January 2020, when the Fifth Anti-Money Laundering Directive (5AMLD) compliance protocols (which were previously required for all European countries prior to Brexit), became active in the UK. This means that the FCA now has the power to oversee crypto businesses in the UK, and that all crypto businesses providing services to UK clients must be registered. In the meantime, a Temporary Registration Regime was introduced for eligible firms seeking permanent registration.
To separate the crypto firms seeking registration from those that are not, the FCA has created a ‘warning list’ for consumers, which is “designed to prevent consumers from dealing with firms that appear they should be authorised by the FCA but are not, or falling for investment scams without undertaking proper checks.” According to P2P Finance News, “The FCA placed the first names, all crypto ATM firms, on this list earlier this month, and has just added 29 crypto custodian wallet providers to the list”.
Why the FCA’s Framework is Good for Crypto
The strengthening of the 5AMLD protocols is vital in creating an environment that supports innovation and development in the sector, and gives both consumers and businesses the confidence to operate in it.
Whilst some crypto-based companies have attracted warranted criticism, Wirex has sought to grow its business from a mainstream position with safety at its core. We therefore applied for registration and were placed on the temporary register. We are now actively seeking to become permanently registered for 5AMLD. With the FCA’s support, we hope that companies like Wirex will effectively establish compliant and thriving businesses in the UK. To achieve this, active dialogue between both parties is important. All global businesses operating in the UK must be held to the same high standards to succeed.
Nevertheless, there still seem to be some challenges in this process of regulatory approval. As Ian Taylor, Chair of CryptoUK said, “what we’re seeing is a really, really high bar for an activity regime for cryptocurrency businesses” given that “there’s a perceived risk that the illicit use of crypto is higher than what it actually is.” There are many crypto-related companies with good intentions that face countless barriers to getting on the approved list.
Firstly, there’s a long wait on the temporary register - less than 5% of applicants have received a decision, and crypto scams are at an all-time high. Not only this, but many of the UK’s top crypto apps are continuing to provide crypto services to UK customers without being listed on the temporary register, meaning that the FCA doesn’t have oversight of their AML and financial crime controls at present. CryptoUK recently sent an open letter to Rishi Sunak highlighting these issues with the process, that are not only restricting innovation, but also job creation and revenue generation in the UK.
The Future of UK Crypto – Transparent and Clean
Wirex has established a reputation for actively seeking out licenses where they exist and applying gold-plated standards where they don’t. As a compliant, UK-based crypto-friendly business, by working alongside the FCA, we want to lead by example for the rest of the crypto industry.
We wholeheartedly agree with the FCA’s move to tighten regulatory requirements for crypto-related businesses, where the FCA is looking to raise standards, reduce risks and increase checks across the board. As such, Wirex is one of the companies going through this process, which we welcome. Although we have made some temporary changes to our operations for UK customers, we are committed to upholding and reinforcing our compliance protocols to ensure we are one of the first on the 5AMLD register.
We believe that this is an opportunity for Wirex to solidify its position as a crypto-friendly leader when our registration has been accepted. Promoting crypto adoption globally, we’ve recently launched a crypto-enabled Mastercard debit card in the UK and EEA region, and have plans for global expansion with a US launch imminent. Aside from this, our world-class team continues to roll out new features, including our brand-new X-tras rewards programme, and upcoming X-Accounts. Growing sensibly and in line with regulations will ensure we are successful in realising a digital economy that our customers can take advantage of.
London is, and will continue to be, Wirex’s home. Regulating cryptocurrencies is vital to strengthen financial crime controls, mitigate financial crime risks, and provide better business practices and customer experience within the crypto sector in the long-term. Wirex is not a company that looks for shortcuts or temporary measures when it comes to financial crime risks and regulatory obligations. We will continue to work collaboratively with the FCA to restore services as soon as possible, and further our vision for the mainstream adoption of the digital economy. Rather than shy away from these standards, we hope all crypto businesses, irrespective of where they operate from, will be held to the same standards when operating in the UK.