Leading cryptocurrency exchange Bybit has opted to cease its operations in the UK, citing the new marketing regulations introduced by the Financial Conduct Authority (FCA) for crypto businesses.
These regulations, outlined in the "Financial Promotion Rules for Crypto Assets," stipulate that marketing efforts must be transparent, fair, and devoid of misleading information, in addition to requiring prominent risk warnings to safeguard UK consumers.
Bybit's choice to halt its operations in the UK marks a significant departure from its previous commitment to the UK market. In an official statement, the company clarified:
"Bybit has always been steadfast in its commitment to adhering to the rules and regulations applicable in the UK. Given the recent introduction of new rules by the UK Financial Conduct Authority… Bybit has taken a proactive approach by temporarily suspending our services in this market."
As part of the suspension process, Bybit has encouraged its UK-based customers to close their positions before January 8, 2024, as any remaining open positions will be subject to liquidation.
While recent rumors floated saying that Bybit intended to leave the UK due to the new regulations, Bybit has since refuted that report, with CEO Ben Zhou stressing that the exchange is committed to staying in the UK, and further stating that they were “in talks with the regulator to find the best solution moving forward”, and that no final agreement had been made yet.
However, increased regulatory scrutiny has already hit the crypto industry hard, with Bybit having recently exited the Canadian market in May due to the regulatory landscape, following in the steps of Binance, dYdX, and others. As such, it wouldn’t be surprising if increased scrutiny led to a similar exodus from the UK.
Stringent FCA Regulations
The FCA's new regulations, which go into full effect on October 8, 2023, require crypto firms to ensure their marketing communications are "clear, fair, and not misleading," with an emphasis on providing conspicuous risk warnings to UK consumers.
The FCA has indicated a willingness to offer crypto firms an extended timeline to implement specific changes, including the provision of a 24-hour cooling-off period, though firms must apply for this extension and demonstrate their capability to make the necessary back-office adjustments.
However, the FCA has similarly expressed their concerns over a lack of communication with many crypto companies in a strongly worded letter on Thursday. The letter stated that many firms had “refused to engage with the FCA” despite best efforts and warned that the FCA would take “robust action” against companies not abiding by the new regulations. The penalties for evading the FCA’s new regulation would be particularly unpleasant, with offending firms not only getting placed on a warning list and having promotional content and websites removed, but also facing up to two years in prison, an unlimited fine, or both.
UK Crime Bill Allowing Crypto Freezing and Seizure In Final Stages
The United Kingdom is poised to enact a new bill later this year, granting law enforcement the authority to confiscate potentially illicit cryptocurrencies even before suspects are convicted or arrested. Under existing regulations, authorities have the capability to freeze digital assets linked to crimes such as drug trafficking, cybercrime, and terrorism, but the power to seize them is absent.
The forthcoming Economic Crime and Corporate Transparency Bill seeks to address this limitation and would prove particularly valuable in situations where "assets have been identified, significant links to criminal activity can be established, but the subject of the investigation is unlikely to face justice in the UK." This provision would apply to individuals targeting UK citizens from overseas.
The bill would empower law enforcement agencies with a potent tool to promptly recover crypto assets, potentially resulting in a notable upswing in the retrieval of digital assets. The majority of these seized assets would be allocated to fund future economic crime prevention initiatives in the UK.