FCA officials tell UK parliamentary committee that crypto-regulation is inevitable

Officials from the UK’s Financial Conduct Authority (FCA) appeared before the House of Commons Finance Committee on March 8 to discuss the agency’s work. Among the issues raised was cryptocurrency regulation, which officials approached with a distinct lack of enthusiasm.

FCA Chairman Ashley Alder who assumed this position in February after serving as chief executive of Hong Kong’s Securities and Futures Commission, told the commission that the FCA was “in the middle of a pretty ambitious reset” as the Financial Services and Markets Bill made its way through parliament. He and CEO Nikhil Rathi answered questions about predatory lending, mortgage rates and a range of other topics before turning to crypto in the final minutes of the hearing.

Former FCA chairman Charles Randle sent a letter to the commission saying “speculative crypto is pure and simple gambling and should be regulated and taxed as such.” Alder responded that globally, “this will not be looked at from a regulatory perspective, except by the financial regulators.” Financial regulation “must be appropriately stringent,” Alder added.

If the principle of “same risk, same regulation” is applied to the crypto business, Alder said:

“The interesting aspect of this is the extent to which crypto has to adapt and effectively detox to fit into this regime.”

Asked if regulation “undeservedly legitimizes” crypto, Alder said, “I agree,” but said public policy issues like money laundering cannot be resolved without regulation.

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The Financial Services and Markets Act, when passed, will give the FCA new regulatory powers over the cryptocurrency industry, but will not remove the risks posed by cryptocurrency. Rathi said: “We will not be able to put in place a framework that protects consumers from losses.”

Most UK crypto holders hold no more than “a few hundred pounds” worth of cryptocurrency, he added.

The Financial Services and Markets Act was tabled in Parliament in July and amended in October of expanding crypto regulatory provisions.