Is Bitpanda in trouble with the UK financial regulator?

It is such a thing with crypto regulation. If you want to offer crypto services on European soil, you first have to fight your way through the jungle of bureaucracy. That’s not entirely unfounded. After all, the sector was completely unregulated territory in the early days of BTC and Co. – the ICO disaster of 2017 was also based on insufficient framework bindings, which had led to a kind of Cambrian explosion of decentralized fundraisers. Alone, 90 percent of the projects were either useless or scams. The SEC is still investigating to this day.

A lot has changed since then. With the 5th Anti-Money Laundering Directive, the EU has for the first time obliged crypto companies to comply with typical supervisory regulations. Although some of the rules are strict, a solid legal framework is generally good news.

The fact that these rules exist now also has Bitpanda get to feel. Because after the company has the UK based custodian Trustology (future Bitpanda custody) bought, entered the UK regulator statements out, which strikes an unwelcome tone. It says:

“The FCA may take steps to suspend the registration of a cryptoasset business if it is not satisfied that the firm or its beneficial owner is suitable and appropriate.”

Does Bitpanda have to worry about its license?

In view of the unusual reaction from the FCA, many a medium speculated, including specialist media such as Bloomberg and The block that the financial authorities are bothered by the merger and could even hinder it. Bloomberg, for example, referred to the possibility of being able to take away the company’s licenses:

The UK’s Financial Conduct Authority has raised concerns about [Bitpanda] and stated it had the power to withdraw the company’s license if it determined that the company or its owners were unsuitable.

Bloomberg

Alone, this scenario is not realistic. Of course, a supervisory authority can shut down shop if the regulations are not observed – that’s a good thing. However, anyone who has observed Bitpanda in the past must conclude that the company adheres to existing guidelines in an exemplary manner. In Germany, for example, there is no advertising far and wide, although the company has been active here for a long time (you can find out whether the broker service is any good from the guide). But: no advertising without BaFin permission – and the company also adheres to this.

Bitpanda expansion not at risk

Rather, the FCA notification is a standard procedure. Agreements were made with the regulator in the run-up to the Trustology deal and, conversely, a subsequent ban is unlikely. Bitpanda can therefore initially take over the London start-up as planned – and also operate in the UK. A company spokesman told:

Both Bitpanda and Trustology are absolutely confident that Bitpanda’s FCA reviews will not raise any issues as Trustology’s new beneficial owner. This check of the new owner […] is basically a standard procedure of the FCA. Bitpanda has a very good working relationship with the FCA, who were informed of this transaction well in advance […]

Bitpanda

The FCA statement can probably be interpreted as a kind of precedent. After all, there has never been a foreign merger with a British crypto company. First movers are entering new territory – with all the advantages and disadvantages that this entails.

A precedent for the FCA too

The fact that market observers see an imminent end for the merger in the FCA text is more evidence of ignorance about supervisory practice on the European continent than a real clinch between the two parties. Takeovers of financial institutions must of course be accompanied by the regulator, if only from a money laundering point of view. Just like the BaFin, the FCA must also check new majority owners for their suitability.

The fact that the authority published a comment before the detailed examination of Bitpanda is rather unusual, but probably has a very mundane reason: the authority is overloaded. The FCA’s website states:

Due to high volume, there have been delays in the allocation of reports under the direction of the FCA. It currently takes about two months between the submission of a complete report and the assignment to a case officer.

Financial Conduct Authority

Despite all the prophecies of doom, there is not much standing in the way of Bitpanda’s expansion in Great Britain.