The FCA’s executive director of strategy has called for “strong and speedy” action on cryptos
Christopher Woolard, executive director of strategy and competition at the UK’s Financial Conduct Authority (FCA), voiced concerns about the potential harm of cryptos during a speech at a crypto event in London.
He mentioned three major risks related to cryptos: harm to consumers who may be subject to fraud, risk to market integrity, and the risk of financial crime related to cryptos, including money laundering and fraud. To tackle these threats, he has called for “strong and speedy” action on the crypto regulation front.
Here are some of the key actions the FCA will take in the future:
- It aims to clarify which cryptos fall within its perimeter. There are different types of cryptos — security tokens, exchange tokens, and utility tokens. The latter typically doesn’t fall within the FCA’s perimeter. By the end of the year, the regulator wants to to clarify which cryptos fall within its oversight. Additionally, it will investigate whether it should extend its oversight to those that currently fall outside of it.
- The FCA may ban certain crypto derivatives. The regulator will consult on whether it should ban the selling of derivatives referencing cryptos, including options and futures, to retail investors. Woolard said the FCA is concerned about retail investors getting sold complex, volatile, and often leveraged derivatives products that are based on cryptos with underlying market integrity issues.
The speech was likely spurred by recent price drops of major cryptos.Bitcoin, Ether, Litecoin, and other cryptocurrencies all saw sharp declines in price last week after months of trading relatively steadily, highlighting yet again that the asset class can be subject to sudden volatility. As such, it’s certainly wise to regulate the sector quickly to ensure the financial safety of investors.
That said, the FCA also recognizes the limits of domestic action, and wants to work collaboratively with other regulators on those issues, Woolard explained. It is likely that collaboration on regulating the crypto market will be welcomed by other countries’ regulators, including the US Securities and Exchange Commission (SEC), which settled penalties with two companies that failed to register their token sales as securities last week.