For the fourth year the FCA has published research on the changing relationship between consumers and cryptoassets. In spite of the pandemic, the strong upward trend in public engagement and media coverage has continued, with the FCA estimating 2.3 million adults now hold cryptoassets.
News of this growth is however countered by the FCA’s finding that the public’s level of understanding of this market has declined. This finding will no doubt motivate the FCA to work harder to ensure consumers are properly protected. In the last year the FCA has issued multiple warnings that cryptoassets are considered very high risk, are a target for scams and investors in them must be prepared to lose all their money. The regulator has also shown it is not afraid to take decisive action by this week banning Binance Markets Ltd, a UK subsidiary of Binance, a company that runs one of the world’s largest crypto exchanges, from conducting any regulated activity in the UK without the FCA’s prior consent.
The FCA is not the only authority raising concerns. In its business plan for 2021/2022 the Serious Fraud Office identified the growth of cryptoassets as one of its four priorities in intelligence gathering and in May the National Crime Agency warned of the increased use of cryptoassets to launder money.
The calls for increased regulation of this burgeoning market are being answered. Since January 2020, UK cryptoasset businesses have been bound by the Money Laundering Regulations and the FCA is their anti-money laundering and counter-terrorist financing supervisor. The government has also launched several consultations on the scope for increasing the regulation of cryptoassets (please see our previous blogs on the cryptoasset promotions consultation and the stablecoins consultation).
The outcome of these consultations is awaited but it seems likely more cryptoasset businesses will find themselves brought within the FCA’s regulatory perimeter and the FCA will hope this offers consumers’ greater protection without stifling the market.