FCA Contact Centre data show increase in cryptoasset-related queries

Maria Nikolova

Data from the FCA Contact Centre show the number of queries received that relate to cryptoassets has been consistently increasing since May 2018, the majority of which relate to scams.

The UK Financial Conduct Authority (FCA) has earlier today published its Annual Report and Accounts 2018/19, with the document including some updates regarding the status of the cryptoasset segment in the UK.

The regulator notes that it has seen a range of different cryptoasset firms asking for Innovate support through the Regulatory Sandbox and the Direct Support function. These include firms using cryptoassets to facilitate cross border money remittance and those focusing on issuance of tokenised debt and equity. Many of the cryptoasset-related business models the FCA sees seem to be becoming increasingly complex.

Reliable information on the marketplace is not yet available, the regulator says. But FCA research and engagement suggests there are around 15 cryptoasset spot exchanges headquartered in the UK, out of a global market of 231. UK exchanges appear to have a combined daily trading volume accounting for approximately 1% of global trade cryptoassets volumes. The FCA has authorised only a small number of firms to date and is working with several more that are seeking authorisation for various regulated activities.

Data from the FCA Contact Centre show the number of queries received that relate to cryptoassets has been consistently increasing since May 2018, the majority of which relate to scams.

The UK Cryptoassets Taskforce report identified 3 major potential harms from cryptoassets – to market integrity, of financial crime and to consumers. The FCA has since published consumer research which reiterated these individual harms but changed its views on the scale of harm. Recognising the relatively small survey sample size, only 3% of those the FCA surveyed had ever brought a cryptocurrency and half of those who bought cryptoassets spent under £200. The research has found that one in 5 consumers did not complete any research before buying cryptoassets.

In 2019/20, the FCA is undertaking further product intervention work in relation to derivatives that reference cryptoassets. Following the commitment made in the UK Cryptoassets Taskforce final report the FCA published a Consultation Paper in July 2019. It proposes a ban on the sale, marketing and distribution of all derivatives (including CFDs, options, and futures) and exchange-traded notes referencing certain types of cryptoasset tokens to retail consumers.

The FCA outlined its concerns that the inherent features of these products pose a risk of harm to retail consumers from sudden and unexpected losses due to valuation issues, financial crime and extreme volatility in the underlying market. The consultation closes at the end of September 2019.

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