FCA Gets Tougher with Cryptocurrency Firms
At a time when Bitcoin and many other popular cryptocurrencies are suffering price plunges, the FCA (Financial Conduct Authority) are receiving a rising number of complaints about dodgy dealings in the cryptocurrency sector. The Authority recently responded to a Freedom of Information request in which it reported that it had carried out enquiries relating to fifty companies which it believes are operating without its consent. Yet, in May 2018, the London-based watchdog had only looked into 24 cryptocurrency firms.
The financial regulator also confirmed that it had received seven reports of whistle-blowing from people who are employed by cryptocurrency firms during 2018 whereas the FCA received no such complaints in 2015, 2016 or 2017.
A partner from a leading accountancy firm, Moore Stephens, believes that the “rash of complaints to the FCA” are a result of the huge sums of money that have been lost by crypto investors due to this year’s price falls.
Despite cryptocurrencies remaining largely unregulated, a new task force has been assembled as part of the government’s FinTech Sector Strategy to monitor the impact of cryptocurrencies on the financial sector. The Cryptoassets Task Force is made up of the Bank of England, the Financial Conduct Authority, and HM Treasury.
The first meeting of the Task Force was held in May 2018 where the participants discussed the impacts of cryptocurrencies, the use of ICOs (Initial Coin Offerings) in the UK, and applications of distributed ledger technology in financial services.
Last month, as part of the Task Force’s work, the FCA published a report of the UK’s policy and regulatory approach to cryptocurrencies in which it set out some of the risks and opportunities that cryptoassets present. In the FCA’s opinion, cryptocurrencies possess “no intrinsic value” and, therefore, investors should be prepared to lose all of the value that they have put in.
The key risks that the Cryptoassets Task Force have so far identified include potential future threats to financial stability, the use of cryptos for illicit activities, and harm to market integrity as well as consumers.
In a bid to lessen these risks, the Task Force has outlined a number of actions which it plans to undertake such as implementing a globally comprehensive response to the use of cryptocurrencies for illegal means a consultation in 2019 to establish how tokens like Bitcoin can be effectively regulated, and looking at the potential for prohibiting retail sales of derivatives for certain types of cryptoassets.
In the meantime, one of the executive board members of the Financial Conduct Authority, Christopher Woolard, has issued a stark warning to consumers and the wider financial community, saying that the general public could “face large losses”, “purchase unsuitable products”, “struggle to access services”, “be exposed to the failings of providers such as exchanges”, and “be exposed to fraud” as a results of the unregulated cryptocurrency market.
And, with the ongoing price collapses of popular cryptocurrencies such as Bitcoin, Moore Stephens’, Andrew Jacobs believes that the FCA will come under greater pressure to ensure that the crypto market “can operate transparently and fairly”.
By Laura Kilby.