FCA’s Andrew Bailey warns of risks stemming from cryptoassets

Maria Nikolova

He added, however, that the FCA is keen to see the potential of the underlying technology.

Technological change and innovation are among the forces actively shaping the work of the Financial Conduct Authority (FCA), Andrew Bailey, Chief Executive of the FCA, said in a speech today.

He noted the need to consider the threats that come from some forms of innovation and the new issues they can pose.

“A good example of this is cryptoassets. We are keen to see the potential of their underlying technology, and do not rule out roles for cryptoassets themselves” – Andrew Bailey, Chief Executive of the FCA.

Mr Bailey warned of the risks associated with cryptoassets: not least in the question of whether the consumers who use them understand the asset and price volatility they involve. He added that the FCA is working closely with the Treasury and Bank of England to assess these issues and come up with appropriate responses.

Just yesterday, John Glen, Economic Secretary, HM Treasury, had to respond once again to questions concerning cryptocurrencies. In particular, he had to explain that “the Chancellor has not had any formal discussions with the Bank of England about a state-backed digital currency”.

He added that whereas the Bank of England is not planning to create a central bank-issued digital currency, it has been carrying out research to understand any potential implications.

Today, Mr Bailey stressed the importance of striking the right balance between regulation which is robust and effective but that also enables change to occur which will benefit consumers. That is why the FCA put sso much emphasis on the work it does with Project Innovate and its regulatory sandbox.

The sandbox, as you may be aware, allows firms to test innovative products and services in a live environment while making sure that consumers are protected in the right manner. It is part of Innovate, an initiative which was launched in 2014 to promote competition in the interest of consumers. Since its inception Innovate has had over 1200 applications and has supported more than 500 firms.

The FCA received a total of 69 applications to cohort four of the regulatory sandbox, an increase on the number of applications to cohort three, with 29 firms to proceed to test. The successful applications come from various sectors, locations and firm sizes. Areas covered include consumer credit, automated advice and travel insurance.

Over 40% of companies accepted to cohort four are using distributed ledger technologies (DLT). Of these, six are using DLT to automate the issuance of debt or equity. Two are using DLT to support the provision of insurance. Other technology applied includes geo-location technology, use of Application Programming Interfaces (APIs) and artificial intelligence.

Eight firms (27%) are operating in the wholesale sector.

The regulator has accepted a small number of firms that will be testing propositions relating to cryptoassets. The FCA says it is keen to explore whether, in a controlled environment, consumer benefits can be delivered while effectively managing the associated risks.

Read this next

Retail FX

ThinkMarkets expands CFDs lineup to over 4000 ETFs and shares

ThinkMarkets has expanded its service offering by incorporating 2500 new CFDs on shares and ETFs on its ThinkTrader platform.

Retail FX

France regulator warns investors of Omega Pro, Businessempire.fr

France’s financial markets regulator alerted investors that scams related to Omega Pro Ltd are beginning to circulate, with the blacklisted firm capitalizing on the situation to run a range of “unrealistic” offers.

Digital Assets

Web3 platform Grand Time paid $2 million in token earnings to date

Community-driven Web3 platform Grand Time said its offering – which includes a multifaceted platforms and its native token – has been gaining significant traction highlighted by impressive operational metrics.

Institutional FX

FX volumes at MOEX halved in April as ruble gains gorund

Currency trading at Moscow Exchange (MOEX) halted its upward route in April as monthly volumes nearly halved from a month earlier.

Digital Assets

FTX US adds stock trading, fractional shares to crypto platform

FTX US, the American subsidiary of crypto exchange FTX has kicked off stock trading feature to its customers in an effort to compete with popular platforms such as Robinhood and eToro.

Industry News

UK FCA empowered to remove brokers’ permissions in 28 days

Businesses with permissions they don’t need or use, risk misleading consumers. These new powers will enable us to take quicker action to cancel permissions that are not used or needed.

Industry News

CFTC charges $44m Ponzi scheme but millions may have fled to foreign crypto exchange

The CFTC alleged that defendants transferred millions of dollars to an off-shore entity that, in turn, may have transferred funds to a foreign cryptocurrency exchange. None of these funds were returned to the pool.

Technology

Saxo Bank deploys Adenza to address Basel and EBA requirements

The integration of ControllerView will enhance Basel-driven capital calculations and reporting at Saxo Bank in support of the bank’s multijurisdictional capital and liquidity reporting requirements throughout Denmark, Switzerland and UK, with plans to expand into the Netherlands.

Executive Moves

ComplySci appoints CTO, CPO, and CLO to further regtech’s product expansion

ComplySci offers compliance software used by more than 1400 global institutions to identify risk and address regulatory compliance challenges.

<