In Brief:
- The FCA Chair delivered a speech on ‘The Risks of Token Regulation’.
- FCA will not register or authorize businesses which won’t explain basic issues.
- The speech says Financial regulation will support innovation, productivity and economic growth.
Charles Randell, chair of the Financial Conduct Authority (FCA) and PRA released a speech called “The Risks of Token Regulation”. The speech focuses on the crypto regulation in the UK, the risks and benefits of regulation, and the role of the FCA.
The drafted speech starts with the example of Kim Kardashian under the ‘crypto scam’ category. She recently promoted an unknown project called “Ethereum max Community”. Kim asked her 250 million Instagram followers to speculate on crypto tokens by that project. Randell says it may have been the financial promotion with the single biggest audience reach in history.
FCA warned about the risks of holding speculative tokens. He says that these tokens are not regulated by the FCA. The FCA currently has a limited role in registering UK-based crypto asset exchanges for anti-money laundering purposes.
The FCA published a list of unregistered crypto exchanges that are operating in the UK, to help consumers avoid using them. He said that “we will pursue our consumer protection objective in limiting the harm. That’s why last year we banned the sale of crypto-derivatives to retail consumers.”
According to the speech, FCA will not register or authorize businesses that won’t explain basic issues. Such as who is responsible for key functions or how they are organised.
Benefits of Regulations
The digital tokens can be issued with aim of being maintained at the value of an underlying sovereign currency. These are generally referred to as stable coins. There are promising use cases for both retail and wholesale payment. Retail cross-border payments where fractional costs can be high for some of the most financially excluded people in our society.
Randell states: “The tide of regulation is turning all over the world, and online platforms should expect a future where regulation addresses the significant risks they pose in the same way as other businesses. Same risk, same regulation.”
FCA has tried to regulate crypto exchanges before. In June, FCA banned the crypto currency exchange Binance. It ordered Binance to remove all advertising and financial promotion. FCA published this notice in August, which specifies that the regulator thinks Binance is “not capable” of the agency’s supervision.
The FCA can take action in two ways. The first is crypto asset promotions and the second is to stop the spread of unregulated businesses from working with regulated ones.
The FCA chair ended by saying “Good Financial regulation supports innovation, productivity and economic growth”.
