The Financial Conduct Authority (FCA) – the U.K.’s financial watchdog – says that it has inspected nearly twice as many cryptocurrency-related ventures this year than it did last May.
2018 has proven to be a rough year for crypto. Not only have prices continued to crash over the last 11 months, but regulations and financial firms are cracking down on business operations every chance they get. The Securities and Exchange Commission (SEC) for example, has already filed several cases against companies either issuing fraudulent initial coin offerings (ICOs) or that have failed to appropriately register with the governing body.
Following the Coincheck hack in Japan last January, the country’s Financial Services Agency (FSA) began taking a stronger stance in crypto regulation and started monitoring the nation’s growing number of digital exchanges. Any that failed to employ harsher security for their customers were issued warning letters saying that if they didn’t up their protocols, they would face permanent shutdown.
Danger for a Popular Exchange
One of those companies was the popular cryptocurrency exchange Binance. The company announced on Twitter earlier this year that according to the FSA, it had failed to comply with specific licensing requirements, and that it was now working with the agency to find a solution and resolve their differences.
John Sedunov – assistant professor of finance at Villanova University – later commented:
“Bitcoin and other cryptocurrencies have risen dramatically in popularity and value over the past few years. This fast run-up may have caught some exchanges off-guard, and they may not have had the capital on hand, time, or even the technical ability to ramp up security features fast enough to ward off potential attackers.”
The FCA is Watching
The FCA recently confirmed that it has investigated roughly 50 firms this year. Last May, the organization examined approximately 24, meaning the amount has more than doubled in six months. The cryptocurrency market has lost more than 80 percent of its overall value since last January, which has sparked several regulatory agencies to get involved in crypto.
Andrew Jacobs of the accounting firm Moore Stephens explains:
“The huge sum lost from 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.”
However, this ultimately conflicts with reports issued last week stating that the FCA was relieved by the crash, believing it would give them more time to write out necessary laws now that fewer people were allegedly interested in investing.
In a conference last week, Gillian Dorner of the Ministry of Finance explained:
“We want to take the time to look at things in a bit more depth and make sure we take a proportionate approach.”
Plans for the Coming Months
Christopher Woolard – the FCA’s executive director for strategy and competition – echoed this easy-going sentiment, commenting that authorities would consult with each other regarding the “grey edges” of crypto regulation by the end of the year. They would then decide on any necessary changes to the present laws.
Woolard did, however, express some concerns regarding cryptocurrency derivatives, saying that they were dangerous to market stability. He later commented that the FCA intended to “undertake one of the most comprehensive responses globally to the use of crypto assets for illicit activities.”
Cryptocurrencies are largely considered commodities in the U.K., which means they’re unregulated by the FCA. Only when cryptocurrency derivatives enter the frame does the FCA become involved. Last March, the organization set up the Crypto Asset Task Force, which is set to implement new guidelines for cryptocurrency-related businesses sometime next year.
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