Cryptocurrency regulation in small steps in the UK
Regulation of cryptocurrencies is all the rage. Whether it exists or is already enshrined in law, it’s a hot topic. Yet one country wants to take its time, and not just any country.
While the US, through the voice of the head of the SEC, believes that platforms will not survive without regulation, the head of the financial watchdog in the UK prefers a targeted approach.
Speaking in Cambridge, Charles Randell, head of the Financial Conduct Authority (FCA), believes that legislating on cryptocurrencies, and tokens in particular, carries a risk of legitimizing scams.
Randell plays a very British ambivalence, trying to stay between several worlds with on the one hand the support of innovation, on the other a not too excessive regulation, and finally a protection of investors
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Excessive regulation could legitimize scams put forward by influencers
Charles Randell’s idea is rather interesting. Rather than targeting all digital assets, he focuses on certain types of tokens.
While the conference in Cambridge was dedicated to economic crime, the FCA director points to the real problem of the lack of knowledge of investors, who would dive into crypto-assets without being aware of the risks they are taking.
In particular, Randell takes aim at influencers promoting unknown or unsavory tokens. The example he mentions is EthereumMax (EMAX), notably promoted by starlet Kim Kardashian.
While the CFA director does not offer an opinion on whether EMAX is fraudulent or not, he does note the power that some influencers can have over their community. The financial risks are significant, particularly in the case of a ” pump-and-dump “, i.e. a meteoric rise before an equally dizzying fall.
For Randell, over-regulation could encompass all crypto-assets without distinguishing between an honest project and a bogus asset. A misinformed investor would therefore run the risk of stumbling upon a scam, thinking that the token was nevertheless authorized by the FCA.
On the same subject – The United Kingdom strengthens its vigilance against ads dedicated to cryptocurrencies
UK cryptocurrency regulation focused on two types of assets
While the FCA already regulates exchange platforms while banning the use of derivatives with individuals, Randell wants future regulations to focus on only stablecoins and security tokens. He does indeed look favorably on the latter two.
Stablecoins and security tokens could be used for cross-border payments, economic infrastructure and financial inclusion. But while he wants regulation, it should not be hampered by too much bureaucracy that could hinder projects.
Instead, Randell supports a moderate approach, similar to that for other FCA-regulated assets. The primary objective is to ensure that token issuers and blockchain companies are solvent and transparent.
The FCA’s director therefore wants to target misleading advertisements for obscure tokens instead, through a prevention campaign for UK investors. Will this speech improve the FCA’s image with the sector? Answer in the coming months.
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About the author: Benjamin Allouch
Formerly a lawyer specializing in personal data and digital law, I quickly became interested in Bitcoin, blockchain technology and their legal implications. I am now a freelance consultant and writer in the field of cryptocurrencies and blockchain.
All articles by Benjamin Allouch.