The UK subsidiary of Hidden Road has been registered as a digital asset firm by the Financial Conduct Authority (FCA). The global brokerage is the first company to be granted an investment firm and digital asset firm licence by the regulator.
Hidden Road, a global credit network for institutional clients, has been granted registration as a digital asset firm by the United Kingdom’s Financial Conduct Authority (FCA). The company’s British subsidiary, Hidden Road Partners CIV UK Limited, became the only prime broker with both FCA investment firm licence and an FCA digital asset firm registration.
The registration will allow the institutional-focused brokerage to offer spot and derivatives products for both foreign exchange (FX) and digital assets like cryptocurrencies and stocks.
“Our institutional client base has long sought like-minded partners who embrace regulatory infrastructure, and this latest approval further demonstrates our commitment to positively shaping the digital asset markets. We are pleased that our UK digital asset operations will be overseen by a regulator as respected as the FCA, and we look forward to partnering with the authority to bring greater stability and institutional adoption to the asset class,” said Michael Higgins, Global Head of Business Development for Hidden Road.
There are currently only 41 entities that have been registered as digital asset firms by the regulatory watchdog. Financial service providers seeking to operate in the UK are required to pass the FCA’s anti-money laundering (AML) tests, which is considered to be one of the toughest in the world. Last month, in her testimony before Parliament, FCA Executive Director for Markets Sarah Pritchard noted that just 5% of the applications received were deemed fit for processing and out of those, only 27% were approved by the agency.
Earlier this month, US-based payments services platform MoonPay was granted a digital asset firm registration by the FCA to offer its British customers crypto-related services. MoonPay became one of only a handful of crypto service providers that have been authorised by the financial regulator to operate in the country. Other firms include crypto exchange Gemini, Bitpanda and eToro, neo-bank Revolut, and brokerage firm Tullett Prebon.
The FCA, which does not yet have the authority to regulate the crypto sector, requires companies to comply with the Money Laundering, Terrorist Financing and Transfer of Funds Regulations (MLR). However, with the upcoming Financial Services and Markets Bill (FSMB), Britain’s crypto industry will be under the FCA’s direct watch. Last month, the agency published a consultation paper that discussed a few amendments to be considered by lawmakers in the FSMB draft.
The Financial Conduct Authority has suggested making AML tests compulsory for all virtual asset service providers (VASP) looking to operate in the country. After the collapse of crypto exchange FTX, which brought down the market to its lowest levels in over two years, the FCA proposed a rule limiting the number of digital asset companies that will be allowed to run promotional campaigns in the country. Crypto-related advertisements made by the firms will need to be approved by agencies authorised by the FCA, which are currently in limited numbers. This will create a bottleneck for companies looking to release their products and services in Britain.
The Financial Services and Markets Bill was passed by the House of Commons last month. The document has been sent to the House of Lords, where it will be debated and sent back to lower parliament with possible suggestions. Lawmakers are expecting the crypto regulation to become law by Spring 2023.