Firms reeling from crypto crash ‘now understand’ need for regulation, FCA boss Rathi says

Crypto firms are starting to see the benefits of regulation according to the Financial Conduct’s chief executive, Nikhil Rathi.

“In the past, innovative firms would have been pleading for less regulation. Now they understand and appreciate that rules are there to help provide certainty,” he said at an event at the Peterson Institute for International Economics, a Washington-based think tank.

“Participants told us they wanted a regulatory regime for cryptoassets as a high priority.”

The watchdog has been warning consumers of the dangers in investing in crypto. The ongoing crypto crash has once again highlighted the risks in participating in an unregulated market.

“Sadly, as a consumer protection regulator, I can’t look at [the crash] with glee, because there are a lot of consumers who lost an awful lot of money,” Rathi said. He noted the market capitalisation of crypto has dropped from a high of around $3tn to one now below $750bn.

“One of the reasons we’ve been so vocal when we’ve been communicating about this is, that anyone who puts their money here is, it’s unregulated,” Rathi said. “You have to be ready to lose everything, and that is sadly, for a number of consumers, including vulnerable consumers, proven to be the case.”

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The FCA has limited remit to regulate the asset class, with most powers coming from anti-money laundering rules. Last year, it prohibited Binance from operating in the UK without written consent from the regulator due to concerns around money laundering.

Rathi noted it was not up to the FCA but to the UK government to establish a crypto regulatory framework. The government back in April outlined its plan to make the UK a “cryptoasset technology hub.” Regulation in that plan was however limited to stablecoins.

There is now a global effort to try to establish a standardised approach to the regulation of the asset class. The Financial Stability Board will send crypto regulation recommendations to the G20 in October. On 13 July, the Bank for International Settlements and The International Organisation of Securities Commissions recommended stablecoins be given the same regulatory treatment as payments and clearing.

“Baseline standards are important because as we’ve seen in other sectors, on things like money laundering, these are inherently cross border activities,” Rathi said. “Having good common regulatory standards, good information sharing across borders is fundamental to the clean markets we all want.”

To contact the author of this story with feedback or news, email Jeremy Chan

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