The FCA chairman said regulators should strengthen the protection of consumers investing in crypto assets, but not make regulation an obstacle to the development of the industry.
In a new speech for the Cambridge International Economic Crime Symposium, FCA Chairman Charles Randell stated that consumers are investing in crypto assets but do not understand the risks.
He highlighted the role of influencers and advertisements, mentioning Kim Kardashian’s recent Instagram promotion of Ethereum Max, a new token issued by unknown developers. While Randall did not delve deeper into Ethereum Max’s status, the campaign’s vast reach and its ability to mislead under-informed consumers should give regulators pause, he said.
Randall says that many consumers are not sufficiently aware of the financial risks of such investments, trusting the support of celebrities and dodgy campaigns to promote cryptoassets on the Internet. The FCA chairman stressed that about 2.3 million UK citizens already own cryptocurrencies, 14% of them used loans to buy. Moreover, according to a study by the FCA, 12% of cryptocurrency holders – roughly 250,000 Britons – mistakenly believe that they will be protected by the FCA or the UK Financial Services Compensation System in case of problems with investments in cryptoassets.
At the same time, Randall noted that British consumers are free to participate in any unregulated speculative activity – from gold and foreign exchange to cards with Pokémon, despite the fact that “many consumers in these markets are suffering serious losses.”
“Why should we regulate purely speculative digital tokens? If we regulate these tokens, will people think they are legitimate investments? Will FCA participation create a “halo of legitimacy” that will create unrealistic consumer protection expectations? ”Randall wrote.
The FCA already regulates cryptocurrency exchanges and has banned the sale of cryptocurrency derivatives to retail consumers. Randall believes that further regulatory measures should be limited to two areas – stablecoins and tokens-shares.
According to Randall, both assets can offer “encouraging useful ideas” for cross-border payments, financial infrastructure and financial services availability, and their development should not be hindered by unnecessary bureaucracy. He advocates a moderate approach under the rules for other FCA regulated entities to ensure the solvency and transparency of token issuers and blockchain-related companies. He highlighted the success of the FCA’s regulatory sandbox and its role in enabling developers to test their ideas in a supportive and isolated environment.
According to the FCA chairman, the agency should continue to fight misleading promotions in the cryptoasset industry, which it has been studying for over a year. Recall that in July, the UK FCA announced plans to invest £ 11 million in a cryptocurrency risk awareness campaign.