FTX was in talks with the FCA about a crypto license before the watchdog’s warning

The Financial Conduct Authority’s warning against FTX last week came as the cryptocurrency exchange tried to secure a UK licence, raising fresh tensions between the market watchdog and offshore crypto players.

The FCA said last Friday that the Bahamas-based crypto-asset platform run by Sam Bankman-Fried was “targeting people in the UK” without authorization and warned consumers against dealing with the company.

Bankman-Fried told the Financial Times that the warning came as a “surprise” after FTX had been “in discussion with the FCA about licensing for some time”.

The rift between the UK regulator and FTX, one of the world’s biggest digital asset companies, comes as the UK government has sought to make the country an attractive place to do business for international crypto groups following criticism that the FCA is hostile to the sector.

FTX initially cast doubt on the meaning of the FCA’s consumer warning, arguing that the regulator intended to alert consumers to a scam impersonating the company. FTX said the phone numbers cited in the FCA’s statement were not actually used by the exchange and have been linked to fraud.

However, people with direct knowledge of the FCA’s process said the warning referred to FTX itself. The scam phone numbers may have been included in error, the people said.

The FCA said the phone numbers had since been removed and that it would not normally contact a company before a warning unless the firm was registered in the UK. It declined to comment further.

Bankman-Fried said his company has tried to follow British rules. “We believe we are compliant with UK rules, but as always will act quickly if we receive any guidance from regulators,” he said.

Companies that offer the trading or storage of crypto must register with the FCA for anti-money laundering oversight if their digital asset activity is “carried on as a business in the UK”, according to an FCA guide. They also need the usual licenses to handle regulated activities such as payments and derivatives.

But foreign crypto companies are generally allowed to serve UK customers provided they do not operate or attempt to sell their services in the UK.

The FCA’s crypto registration regime became a point of contention last year as companies and lawyers complained about a lack of qualified staff at the regulator and lengthy delays. The FCA blamed the slow progress in part on the poor quality of crypto firms’ applications and defended its strict approach.

UK ministers have since sought to strike a more positive tone, pledging to make the UK a “global hub” for digital assets and arguing that the openness of digital assets is key to the country’s competitiveness in financial services after Brexit.

The FCA last year clashed with Binance as the world’s largest crypto exchange tried to secure a UK licence. After Binance acquired an FCA-regulated entity, the regulator issued a series of public reprimands against the company, saying its “complex and high-risk financial products” posed “a significant risk to consumers”.

Binance, a major rival of FTX, later withdrew its application but has said it intends to repair its relationship and reapply for UK oversight.