The UK’s Financial Conduct Authority (FCA) has published a consultation on regulating cryptocurrency service providers. Currently, UK legislation only covers the marketing of cryptocurrencies and AML compliance for crypto providers. However, draft legislation will give the FCA the authority to regulate the sector more broadly in a similar manner to other financial services providers. For most areas, the rules will be the same as for other regulated entities, but there are exceptions.
“We want to develop a sustainable and competitive crypto sector – balancing innovation, market integrity and trust,” said David Geale, executive director of payments and digital finance. “Our proposals won’t remove the risks of investing in crypto, but they will help firms meet common standards so consumers have a better idea of what to expect.”
The publication includes a consultation running to 12 November and a discussion section on applying Consumer Duty to crypto. This duty would require firms to act to deliver good outcomes for consumers. Feedback on the discussion is requested by 15 October, with this being more like a pre consultation.
The Consumer Duty section is perhaps the most notable because it encounters issues specific to the crypto sector. For example, one of the rules that forms part of this principle is that firms must ensure that “products and services provide fair value to retail customers”. The FCA sees this as tricky because of the “high volatility and lack of inherent value of most cryptoassets”.
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