The UK’s Financial Conduct Authority (FCA) is reportedly formulating prudential requirements for firms engaged in cryptocurrency-based operations. As a trusted regulatory body, the FCA is entrusted with the vital role of maintaining the registry of approved crypto firms striving to operate within the UK’s anti-money laundering criteria.
However, what seems to be particularly novel about this approach is the agency’s appetite to also garner discussion concerning prudential rulings for companies venturing into the crypto realm. This consultation is likely to commence once the broader regulations on cryptocurrency activities are introduced by the Treasury and Parliament. A timeline is yet to be publicly shared about when these regulatory powers will be passed on to the FCA.
Prudential requirements are not a new frontier for the FCA. On the contrary, the regulatory body already oversees similar requirements for investment firms ranging from fund managers to trading firms based in the UK. The regime compels companies to evaluate capital adequacy and all potential risks to discern possible harm to investors. Furthermore, it enforces the implementation of resourceful measures to counteract such harm.
In aligning with these policies, last year the FCA issued a notice to firms with exposure to crypto entities. The directive asked companies to ensure appropriate systems were in place to deter the misuse of their platforms for illicit financial activities. It also encouraged firms to review whether their associates were registered crypto companies.
This forward-thinking approach by the FCA is largely attributed to the substantial regulatory powers the agency received under a recent financial markets bill. This development suggests that as the UK navigates its vision to be a global hub for the crypto sector, the FCA is poised to be a key figure in this endeavor.
It’s important to commend the initiative of the FCA, as mitigating potential harm to investors is paramount. However, critics may argue about the possible stifling of innovation that tends to come with stringent regulations. Sustainability of the UK’s ambition to be a leading crypto hub could hinge on the successful marriage of robust regulatory oversight and permitting invention and expansion in the crypto market.
So, if we reduce this down to its core essence; the FCA is diligently devising new rules for crypto firms. Whether these rules will empower or constrain the flourishing crypto sector in the UK, remains to be seen. But one thing is clear – the development of these rules is likely to highly influence the direction the UK crypto market takes in the future.
Source: Coindesk
