UK's Financial Regulator Criticized for Slow Response to Crypto Industry Issues
Summary:
The UK's National Audit Office (NAO) criticizes the Financial Conduct Authority (FCA) for a slow response against illicit activities in the crypto industry. Citing concerns about high staff turnover rates and a lack of specialist skills, the NAO says these are the key risks to the FCA's commitments. The FCA has now recruited more staff and invested £317m into its change programme. Despite requiring crypto firms to comply with anti-money laundering regulations since January 2020, the NAO states that the FCA took almost three years to take action against illegal crypto ATM operators. Additionally, the NAO claims insufficient crypto expertise was the cause of delay in registering crypto firms for regulatory approval.
The UK's National Audit Office (NAO) has expressed apprehension about the capability of the Financial Conduct Authority (FCA) to regulate the cryptocurrency sector. In a recent publication named 'Financial services regulation: adapting to change,' the NAO conveyed that the FCA seems lethargic in the face of illegal actions within the crypto space. High high rates of employee churn and the absence of niche expertise are key risks to the FCA's core commitments. The FCA's response has been to hire new personnel and allocate £317m to its change initiative, which should support the preparation of financial services for what lies ahead.
The NAO drew attention to the FCA's delay of nearly three years in taking measures against unlawful operators of crypto ATMs. Reports from Cointelegraph on July 11 indicated that a planned investigation by the FCA led to the closure of 26 crypto ATMs. The NAO observed, “Whilst the FCA's compliance requirements for crypto-asset firms to adhere with anti-money laundering regulations have been in place from January 2020, with oversight undertakings including engagement with unregistered businesses, it was not until February 2023 that the FCA commenced enforcement actions against illicit operators of crypto ATMs.”
The NAO also cited the absence of FCA employees with crypto specialization as a reason for the delay in the registration process for crypto businesses that sought regulatory approval. The report noted, "The scarcity of expertise in crypto contributed to the FCA's longer than anticipated timeline for the registration of crypto-asset firms under anti-money laundering regulations." According to a report by Cointelegraph on January 27, since the introduction of regulations in January 2020, the FCA has only granted approval to 41 out of almost 300 crypto firms that were seeking regulatory approval.
This comes in the wake of guidance material issued by the FCA to aid crypto businesses better comprehend the recently enacted crypto promotion regulations. On November 2, Cointelegraph reported the release of a "finalized non-handbook guide" for adherence to the new regulations by the FCA. The regulations are particularly focused on acceptable methods of customer promotion by crypto firms. The FCA addressed issues such as crypto businesses making unfounded promises about the ease of crypto usage without providing relevant risk information, as well as insufficient prominence given to risk warnings in tiny fonts.
Published At
12/10/2023 9:06:24 AM
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