Several years ago, crypto was on the alternative spectrum and very niche but nearly a decade and a half since its creation, it has become more widespread, according to the Financial Conduct Authority.
Speaking at City Week 2023 yesterday (April 25), Sarah Pritchard, executive director of markets, and executive director of international, said crypto - that one-time symbol of alternative rebellion - has become more widespread.
She explained that like many things, it has now picked up in popularity.
And yet so few consumers know what it is, how it works and what they are getting into.
“As this once alternative investment becomes more popular, we need an open debate about risk, mitigation and the limits of regulation,” she said.
Pritchard said at the time of FTX’s collapse, she was in the US meeting regulatory peers in Washington and New York and said “it was instructive to see them work effectively” and at pace to try to stop the fallout spreading.
“While we have been relentless about warning that consumers need to be prepared to lose all their money if buying cryptoassets - and actually issued a warning a week before FTX collapsed about its unauthorised operation in the UK - we have always been open to innovation,” she said.
She argued that cryptoassets and blockchain offers opportunities for more efficient and innovative financial services and products.
For example, they can make international cross-border payments faster and cheaper, which could support international trade or help the global workforce more easily send money to friends and family overseas.
“These are worth exploring,” she said.
“At the FCA, our current remit over crypto is limited to making sure that crypto firms that operate here comply with anti-money laundering and counter-terrorism legislation.”
“Only when the government legislates will we have more powers to regulate crypto.”
The UK’s Money Laundering Regulations require UK-based cryptoasset exchanges and custodians to apply for registration with the FCA – but this does not bite on overseas firms who may target UK based consumers, Pritchard explained.
Of the applications the FCA has determined, nearly three quarters - 195 - were either refused or withdrew their application.
Yet she said the FCA has supported firms to meet the right standards, and registered 41 crypto firms of all sizes.
Financial promotions
However, moving from the alternative spectrum into becoming widespread will attract change and one of the areas where the FCA sees the most tangible change will be in the regulation of financial promotions.
“This will come into our remit once the government legislates and firms will have four months to implement the changes,” she said.
“The rules will be published after the legislation is put forward.
“Firms should start preparing for this now: we expect crypto promotions to be treated on a par with other high-risk investments and failure to comply will be a criminal offence.
