U.K. Financial Conduct Authority (FCA)
|Financial Conduct Authority|
|Key People||Andrew Bailey, Chief Executive|
The U.K Financial Conduct Authority ("FCA"), which is one of the successor agencies of the U.K.Financial Services Authority established in 2013 by the U.K government, has authority over cryptocurrency derivatives trading. It has no direct authority over cryptocurrency issuance or trading.
The FCA has authority over more than 56,000 financial services companies in the U.K, which it advised several times to be cautious when dealing with cryptocurrencies and their customers who deal in them. On June 11, 2018 FCA's executive directors in charge of the Retail & Authorisations and the Investment, Wholesale & Specialists Departments issued supervisory guidance regarding criminal activity related to transactions in cryptocurrencies.
The FCA issued a warning to investors in the U.K. in February 2019, saying that investment scams cost U.K. investors €197 million (about $223 million) in 2018. These investment scams included cryptocurrency-related scams, such as fraudulent initial coin offerings (ICOs). The report said that the most commonly-reported scams in 2018 were related to shares and bonds, forex trading, and cryptocurrencies.
On May 24, 2019, the FCA issued a warning against ICAP Crypto, a cryptocurrency-focused firm that the FCA said is a "clone firm," or an imposter mimicking a legitimate firm (in this case ICAP Europe Ltd.) in order to scam consumers. The FCA also said that ICAP Crypto is not registered with the FCA.
In March 2019 the FCA published a research report on consumer behavior regarding cryptocurrency investment. Based on the answers given in the report, most of the individuals interviewed displayed little to no understanding of how cryptocurrency works, nor how to profit off of investments made in them. Despite this, the majority of the interviewees seemed to view them as a way to "get rich quick."
Some highlights of the report include the following:
- 8% of interviewees said that they had completed "deep research" before purchasing their digital assets.
- 16% of interviewees said that they bought cryptocurrency without doing any research at all.
- 30% of interviewees said that their crypto assets were part of a wider portfolio.
- 18% of interviewees said that they expected to profit quickly.
- 62% of interviewees said that they viewed unregulated digital assets as "alternative investments" to investments offered in traditional finance.
- 11% of interviewees said they viewed cryptocurrency and digital assets as an alternative to buying shares or other financial instruments.
- 8% of interviewees said that their investments in digital assets were part of a "long-run savings plan," such as a pension.
- 31% of interviewees said that they viewed the investment as a "gamble."
- Less than 30% of interviewees said that they have not invested in crypto because it is "too risky."
- 16% of interviewees said that they had not invested in crypto because they simply did not have the money to do so.
The same day this report was published on the FCA's website, the regulatory organization also released another report for consumers entitled, "How and why consumers buy cryptoassets." You can read the report here.
Libra, the cryptocurrency project by Facebook, faced considerable scrutiny by the FCA. In June 2019, the FCA, Bank of England, and the U.K. Treasury announced that they were in the process of working together to determine how best to regulate Libra. Andrew Bailey, chief executive of the FCA, said that the Libra project "touches all three of us," and "has the potential to be extremely significant."
Referencing Facebook's internal corporate motto, "move fast and break things," in July 2019 the FCA's senior regulator Christopher Woolard warned cryptocurrency issuers, including the Libra Association, against "cutting corners" when striving to provide innovative technology. He also said that new innovations would have to work in the interests of consumers, ensuring that they understand and actively consent to "tradeoffs" inherent to the business models of new financial service providers, and to consider their broad impact on international market stability, as well as the need for new jargon to discuss the technology and its impact on society.
On July 3, 2019, the FCA proposed a blanket ban on the selling, marketing, and distribution of crypto derivatives products. The regulator said that such products' volatility and unregulated nature posed a threat to retail customers in the U.K. Christopher Woolard, a senior regulator, said that the regulator "will act when we see poor products being sold to retail customers.” The organization released a statement saying that the ban would potentially save non-professional investors £75m to £234.3m a year. On July 31, the FCA published its final policy statement on "cryptoassets," noting the FCA's limited jurisdiction: "Consumers should be mindful of the absence of certain regulatory protections when considering purchasing unregulated cryptoassets. Unregulated cryptoassets (e.g. Bitcoin, Ether, XRP etc.) are not covered by the Financial Services Compensation Scheme and consumers do not have recourse to the Financial Ombudsman Service."
In the beginning of October 2019, the FCA had 84 open inquiries into digital asset companies regarding regulatory matters - a significant increase from around the same time the previous year.
Full page on MarketsWiki
- Virtual currencies: how regulators treat it (snapshot, January 2018). Freshfields Bruckhaus Deringer.
- UK's FCA Chief Warns Bitcoin Investors: Be Prepared to Lose Your Money. Coindesk.
- CRYPTOASSETS AND FINANCIAL CRIME. Financial Conduct Authority.
- UK's Financial Conduct Authority Reports Crypto Fraudsters Are Moving To Social Media. ETH News.
- FCA warns public of investment scams as over £197 million reported losses in 2018. Financial Conduct Authority.
- UK Financial Watchdog Warns Public of Crypto Clone Firm. Cointelegrraph via Yahoo Finance.
- Cryptoassets: Ownership and attitudes in the UK Consumer survey research report. Financial Conduct Authority.
- UK watchdog warns against 'get rich quick' crypto lure. International Investment.
- Facebook’s Cryptocurrency Has U.K. Regulators Joining Forces. Bloomberg.
- FCA regulator warns cryptocurrency groups to ‘get it right’. Financial Times.
- UK regulator proposes ban on crypto-based derivatives. Financial Times.
- FCA provides clarity on current cryptoassets regulation. U.K. Financial Conduct Authority.
- Sharp rise in watchdog scrutiny of UK cryptocurrency groups. Financial Times.