The Financial Conduct Authority, the UK’s financial watchdog, has inspected twice as many cryptocurrency-related businesses than it had in May, according to the Daily Telegraph.
The authority has investigated 50 firms so far this year, compared to 24 in May, it told the paper in response to a Freedom of Information enquiry.
The consensus seems to be that the increased scrutiny is a result of the cryptocurrency market recently losing around 80 percent of its value in a matter of weeks. For example, Andrew Jacobs of accountancy firm Moore Stephens told the Telegraph: “The huge sums lost as a result of cryptocurrency prices falling this year will have triggered a rash of complaints to the FCA. Now that prices have collapsed, fraud is likely to be exposed, with greater pressure coming to bear on the FCA to ensure that this market can operate transparently and fairly.”
This conflicts slightly with reports last week that the FCA actually felt relieved by the crash because it found itself in less of a rush to write laws now that fewer people are interested in investing.
According to Reuters, language used by FCA and government figures at a conference last week was decidedly unhurried. Gillian Dorner of the Ministry of Finance said: “We want to take the time to look at that in a bit more depth and make sure we take a proportionate approach,” while Christopher Woolard, the FCA’s executive director for strategy and competition, said that the authority will consult by the end of this year on whether the “grey edges” of the perimeter of regulation should be clarified. It will then, at a later, unspecified date, consult on whether to change the perimeter itself.
Wollard did express concern about cryptocurrency derivatives, however. He expressed concern that cryptocurrency derivatives are dangerous to market stability, and said that the FCA intends to “undertake one of the most comprehensive responses globally to the use of cryptoassets for illicit activities.”
Adapting to Change
Cryptocurrency is only partially regulated by the FCA. Tokens are considered commodities in the UK, which are not the FCA’s concern – but cryptocurrency derivatives are. The FCA has, like many other regulators, divided tokens into three groups for the purpose of classification – currency, security, and utility.
It has set up a dedicated team (the ‘crypto-assets task force’) to investigate the matter. The team was created in March and intends to release guidelines early next year. So fast-moving has the FCA been on this subject, a number of private businesses set up their own regulatory organisation.