The chair of the UK’s Financial Conduct Authority (FCA) released a speech on crypto regulations, including the risks and benefits.
Earlier today the head of the UK’s financial regulator released a speech called, “The risks of token regulation.”
The speech focuses on the current situation of token regulation in the UK, the risks and benefits of regulation, and the role of the FCA. However, the speech begins with an example of Kim Kardashian’s crypto Instagram stunt. The speech uses this as an example of crypto scams.
In terms of the FCA’s role, the speech says there are currently limitations. The regulator only deals with exchanges for the purposes of anti-money laundering. Much of the lead up to the conversation around regulation spoke on consumer protection as the ultimate end goal.
“We will pursue our consumer protection objective in limiting the harm. That’s why last year we banned the sale of crypto-derivatives to retail consumers.”
For now the UK is without general regulations on issuance or permitting of speculative tokens, which is crypto’s classification. The speech goes so far as to say that any further regulation would validate cryptocurrencies as investment. “Will the involvement of the FCA give them a ’halo effect’ that raises unrealistic expectations of consumer protection?
According to the regulator, the FCA won’t authorize business which cannot explain the basics of organization and operations. In other words: who is in charge. This leaves the waters very unclear for decentralized exchanges (DEX) and other DeFi projects.
Regulation Benefits
Despite all the talk of scams and unclarity in the crypto industry, the speech mentioned a few positive aspects. Mainly, found in the technology underlying cryptocurrencies and payment efficiency. Stablecoins specifically received praise.
“There are promising use cases for both retail and wholesale payments, particularly retail cross-border payments, where frictional costs can be high for some of the most financially excluded people in our society.”
At the moment it says UK regulators have the ability to take action in two ways. Cryoto asset promotions and stopping the spread of unregulated businesses from working with regulated ones.
It’s apparent that the UK has a watchful eye on the crypto industry. Just last week crypto exchange Coinpass received official approval from the FCA. However, if regulators continue their hesitant stance on the industry, despite good intentions, UK crypto companies may suffer. Already some crypto-centric firms ceased operations in the midst of bans and regulations.
In the end, the FCA says, “Good financial regulation supports innovation, productivity and economic growth.” The regulators hope for a balance which benefits all parties.
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