The financial watchdog of the United Kingdom has called for further clarity regarding the regulation of crypto assets, as it launches a consultation on the guidance that is applicable to the wide sphere of crypto.
The Financial Conduct Authority (FCA) said that companies will have a better understanding of whether their activities with crypto assets including bitcoin are compliant with regulation as an outcome of the guidance that it receives.
The executive director of strategy and competition at the FCA, Christopher Woolard, stated: “This is a small but growing market and we want both industry and consumers to be clear what is regulated, and what isn’t.”
He added: “This is vital if consumers are to know what protections they’ll benefit from and in ensuring we have a market functioning as it should.”
Previously, the FCA has warned the consumers and firms alike to approach investing in crypto assets with caution, as they may not be aware of the lack of current regulatory oversight in the industry. Should they lose their money, the consumers are not able to apply for compensation from the Financial Ombudsman Service or the Financial Services Compensation Scheme.
Cryptoassets include digital currencies such as litecoin and bitcoin. It also includes security tokens and utility tokens. A task force on the matter, that includes representatives from the Treasury, the Bank of England, and the FCA published its final report in 2018. It outlined the potential harms of the industry.
In a statement that was released today, the FCA stated: “While crypto assets have the potential to bring benefits to markets, firms and consumers, there remains considerable risks to markets and consumers.”
It added: “This is an important first step in delivering the outcomes of the Cryptoasset Taskforce, as well as in our own work to address the harms from crypto assets and encourage innovation in the interest of consumers.”
The chair of self-regulated trade body Crypto UK, Iqbal V. Gandham, said that it is “imperative” that the FCA balance the protections against consumer harm with a framework which will enable the sector to grow.
Jill Lorimer, a partner at Kingsley Napsley, added that the guidance “will be warmly welcomed by firms who are currently operating in this space, or who seek to do so. A clear regulatory framework is absolutely essential to the UK maintaining its position as one of the most attractive destinations for crypto asset innovation.”