The Financial Conduct Authority (FCA) is preparing to introduce stricter regulations for the Crypto sector of the VK, because according to a new discussion document it wants to reduce the risks for retail investors.
This push comes as digital assets become increasingly popular with the general public. According to recent data, 93% of British adults are aware of crypto, and around 7 million people, or 12% of the population, currently have a form of digital currency.
In view of this, the financial regulator wants to promote a digital financial environment that is safer, more transparent and supports innovation.
David Geale, executive director of the FCA for payments and digital finances, emphasized the need for a regulatory framework that makes responsible growth possible. He noted that crypto offers opportunities, but brings a considerable risk, especially for less experienced investors.
Hannah Meakin, partner at Norton Rose Fulbright, said CryptoSlate“
“The recording of considerations regarding the use of credit for the purchase of cryptoassets is also remarkable and demonstrably reflects the strong dedication of the FCA to consumer protection and market integrity.
The FCA clearly tries to create a regime that effectively balances innovation with appropriate levels of supervision. “
Act against Crypto -Loingen
One of the proposed measures is a reduction of crypto credit services. The FCA is concerned about platforms that offer individual users of borrowing and borrowing.
The regulator mentioned the collapse of companies such as Celsius Network in 2022, which reflected the dangers of non -regulated loans in crypto. It stated that this business model entails considerable risks that can lead to the loss of crypto -ownership, counterparts and conflicts of interest.
It also noted that:
“Revenue generation in cryptoasset loans is speculative because the return has not been established, and consumers usually do not know exactly how their cryptoassets are used to generate those returns.”
Although it admitted that only 9% of the crypto holders led such activities in the 12 months to August 2024, the regulator is of the opinion that the risks remain considerable.
As a result, the FCA plans to fully limit access to the retail to these services, which states that they are not suitable for the average investor in their current form.
Crypto -credit purchase
The regulator is also considering limits for the use of credit to buy crypto, which indicates the increased popularity of such practices.
According to the FCA, the figures of a YouGOV survey show that although only 6% of investors used money in 2022 to buy crypto, that number had risen to 14% in 2023.
FCA noted that these trend households can float in untenable debts, especially when the reimbursement depends on volatile assets.
It added:
“The potential for impulsive crypto purchases can also increase the risk of overstartness. Credit usually also bears interest charges and reimbursements, which can rise if the balance is not repaid. Not repaying can also lead to the credit score of the consumer being degraded, which can get their assets to both bends both to both lenders to both bends.”
The FCA noted that although some banks and payment companies have already limited such purchases, many crypto platforms are still promoting them.
So the financial regulator is considering a complete ban on the use of credit cards or e-money credit lines to buy crypto. However, Stablecoins issued by FCA authorized entities may receive exemptions.
Commercial problems
The FCA also plans to tighten the supervision of crypto -trading platforms to protect retail customers.
The supervisor marked various platform issues, including poor liquidity, lack of transparency and potential conflicts of interest. As a result, new rules would require that platforms separate their trading activity from those of their customers.
According to the proposed changes, Platforms must provide transparent data on prices and implementation. The FCA is also planning to prohibit companies to pay intermediaries in exchange for managing trade assignments.
In the meantime, all crypto companies that serve British users must register a local legal entity and adhere to the domestic regulations. This requirement applies to retail -oriented companies and those who focus on institutional customers.