September 6, 2021

FCA warned of increased regulation of the crypto industry

FCA warned of increased regulation of the crypto industry

The regulator should strengthen protections for consumers investing in cryptocurrencies without a proper understanding of the risks involved, but not go to extremes causing the opposite effect. That's what the head of the FCA, Charles Randall, said.

In his view, excessive oversight can create unrealistic expectations of consumer protection. Digital asset issuers should "be within reach" of the regulator, the official explained.

Obviously, because of the decentralized way speculative tokens are created, we will need access to the company and its team. That way we can monitor and enforce our requirements, Randall explained.

The head of FCA stressed that the agency will reject applications for registration of companies that are not able to answer questions about business structure and management.

Such position was stated in the supervisory notice in relation to the British unit of Binance from August 25.

According to Randall, the FCA is concerned about cryptostartup promotions involving opinion leaders. In particular, he mentioned the EthereumMax project's ads featuring Kim Kardashian.

The official noted that with the FOMO effect among retail investors and the proliferation of digital asset-related fraud, many consumers are becoming blind to potential financial losses.

It's critical that any regulation of such campaigns require clear risk designation and not give the impression that the token itself is subject to regulatory oversight or the FCA has approved it, he explained.

Randall could be referring to the situation with cryptobroker CoinBurp. In July, the FCA said the firm lacked authority to conduct an initial public offering of the BURP token. In investor materials, CoinBurp described itself as a "regulated broker."

Randall emphasized that the agency did not want to create more prohibitions for consumers than in other markets, "which already have no shortage of risks for investors."

We just don't know when or how this story will end. As with any new speculation, there is a risk that it will not end well, he explained.

The head of the FCA has indicated that the agency could start with moderate oversight of Stablecoin and security tokens.

In his view, both options could provide new use cases for cross-border payments, financial infrastructure and increased access to financial services. They should not be hampered by excessive bureaucracy, the official added.

According to Randall, the FCA intends to make sure that token issuers and blockchain firms are solvent and transparent.

The official pointed to the success of the regulatory sandbox and its role in allowing developers to test their ideas in a supportive and isolated environment.

Randall believes that effective regulation of cryptocurrencies will require consideration of three questions:

  • How to make it harder to use digital assets in financial crimes;
  • How to support useful innovation;
  • The extent to which consumers should be free to buy unregulated speculative assets and take responsibility for their decisions.

A wave of regulation is sweeping the world. Online platforms must realize that the same supervisory regime awaits them as in any other business. The same risks - the same regulation, he concluded.

Recall that in December 2020, the FCA introduced a temporary registration regime for cryptocurrency companies. It was supposed to last until July 9, 2021.

In June, the agency extended the regime until March 31, 2022, while the Authority "conducts a thorough assessment."

In the same month, 64 cryptocurrency companies deregistered in the U.K.

Jack Evans

About the author

I became a crypto asset owner in 2014, when the industry was in its infancy. Before that, I was working in the classic US and European stock markets. Since then, I have gained extensive experience in both cryptocurrency investing and day trading. I am happy to share with readers my experience with crypto exchanges, DeFi and NFT instruments. 

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