Written by 8:41 am Cryptocurrency

The FCA and Cryptocurrency – Lexology

Syed Rahman of Rahman Ravelli considers the Financial Conduct Authority’s ongoing response to cryptocurrency-related issues and the cooperation between US and UK authorities.

In a speech at the Peterson Institute for International Economics, the Financial Conduct Authority (FCA) Chief Executive Nikhil Rathi talked of the benefits of the US and UK working together when it comes to cryptocurrency. His speech also outlined how he sees his agency responding to the challenges posed by crypto now and in the future.

Rathi spoke of the opportunities and risks associated with crypto, calling it “a new product, easily accessible and able to operate cross-border’’ that raised issues including consumer protection, market integrity, data privacy and financial crime. He cited the FCA’s securing of an agreement with Google that it would not permit non-FCA verified firms to advertise financial products on its platform as an example of its achievements. He also outlined how the FCA “sounded the alarm’’ over supervising Binance and placed restrictions on it so it could not undertake any regulated activity in the UK without written consent.

The chief executive explained that the UK and US had held talks as part of the US-UK Financial Innovation Partnership, where there was an agreement reached to deepen ties on financial innovation after exchanging views on cryptoasset regulation and market developments. The UK, US and Singapore also announced the launch of the IOSCO (The International Organization of Securities Commissions) taskforce on decentralised finance and crypto market integrity risks.

While the FCA’s remit is currently limited to anti-money laundering rules for platforms, it has applied those rules strictly; with what Rathi calls “a significant number of firms’’ having worked with the regulator to improve their controls and systems. He has said that the FCA has supported the development of many UK blockchain firms, with hundreds of companies going through its Innovation Hub programme that helps financial services firms launch innovative products and services.

The FCA held its CryptoSprints in May and June this year, where regulators, academics, industry experts and investors came together to discuss possible policy ideas in an attempt by the regulator to seek industry views about the crypto market and take soundings on how to design an appropriate regulatory regime. Rathi has said that those involved in this exercise viewed a regulatory regime for cryptoassets as a high priority and wanted any regulation phased in so that firms and investors could prepare and adapt to any rules that were introduced for cryptoassets.

The FCA has said its involvement with the Digital Regulators Cooperation Forum has boosted cooperation with the Office of Communications (Ofcom), the Competition Markets Authority (CMA), the Information Commissioner’s Office (ICO) and the Financial Conduct Authority (FCA). Having joined as a full member in April 2021 – after having previously been an observer member – it is working with fellow members to develop a coherent approach to regulation and policy making, promote innovation, strengthen international engagement and work alongside other regulators.

In his speech, Rathi referred to how much the FCA values its ongoing enforcement cooperation with US agencies such as the Securities and Exchange Commission, the Commodity Futures Trading Commission and Department of Justice. This, he believes, “has created an important set of precedents that demonstrate the ability to act effectively on a global basis.’’

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