The UK’s Financial Conduct Authority has raised concerns about the cryptocurrency market and has warned the public of the threats involved with unregulated cryptocurrencies.
A statement issued by the FCA read, “A combination of market immaturity, volatility, and a lack of credible information or oversight raises concerns about market integrity, manipulation and insider dealing within crypt-asset markets.’
They also went on to say that the existing rules did not apply to some cryptocurrencies such as bitcoin and ethereum.
Nick Cook, Director of Innovation at FCA, said that the number of British consumers investing in crypto was fairly low compared to other countries’ consumers, but that they “have some concerns around some of the harms that consumers can be exposed to”.
As many of these cryptocurrencies are unregulated, the finance ministry has said that it would be open to the watchdog’s guidance on the matter.
Because crypto lacks guarantees and reaps rapid rewards, retail investors all over the world have become drawn to it.
While the FCA did not explicitly mention Libra, the watchdog’s concerns over cryptocurrencies came as Facebook revealed its plans for its very own cryptocurrency, the Libra coin, which has recently sparked a great deal of scrutiny by both regulators and politicians around the world. Finance ministers and central bankers have been concerned about the regulation of crypto and have vouched for stricter regulations in an effort to avoid upsetting the world’s financial system.
The FCA stated that some “stablecoins”, like Libra, backed by assets such as fiat currencies, could fall under its regulation and supervision in some specific cases. They did not explicitly comment on their plans for Libra as the currency’s operating model, structure and design are yet to be determined.
Iqbal Gandham, Chair and Founding Member of UK Crypto Association and MD at eToro, commented on the issue and stated, “Britain’s cryptoasset sector is a key part of the UK fintech industry but needs regulatory certainty to reach its full potential”.
Indeed, the rules and legislation with regards to crypto differ from country to country. Cryptocurrencies are completely banned in China and India may follow suit. However, in the UK, US and some EU countries, are looking into applying existing securities, anti-money laundering and consumer protection rules.
Bradley Rice, lawyer at Ashurst, said that the FCA’s hands were “tied”.
He added, “If the UK wants to bring more crypto assets into the regulatory net, the law has to be changed, and that is in the Treasury’s gift.”