UK Govt brushes off questions about FCA’s proposals to ban crypto investment products
As questions about the impact of the proposed ban grow in volume, John Glen stresses that the FCA is operationally independent from government.
For more than a year, the UK Financial Conduct Authority (FCA) has been mulling rules concerning cryptoasset-related activities. These efforts have led to, inter alia, the launch of the Cryptoasset Taskforce, as well as a set of consultations about the offering of cryptoasset-based products and the requirements for companies that offer crypto-based services.
Judging from the latest comments made by John Glen, Economic Secretary to the Treasury, the UK Government is not quite concerned about the issues related to the cryptoasset sector nor about the developments around the FCA consultations.
On October 21, 2019, John Glen replied to a series of questions related to cryptocurrencies, with most of them about the effects of the proposed ban on the offering of crypto-based investment products to retail investors.
Here is one of these questions:
“To ask the Chancellor of the Exchequer, what assessment he has made of the effect of the Financial Conduct Authority’s proposed ban of cryptoasset investment products for retail investors on (a) Revolut and (b) other challenger banks that offer products linked to cryptoassets”.
The answer by John Glen to all of the questions was uniform:
“The Financial Conduct Authority (FCA) made a commitment to consult on the potential prohibition of the sale to retail consumers of derivatives referencing certain types of cryptoassets in the final report of the Cryptoasset Taskforce, comprised of HM Treasury, the Bank of England and the Financial Conduct Authority, in October 2018.
The final decision on this consultation is a matter for the Financial Conduct Authority (FCA), which is operationally independent from government.
The government continues to endorse the approach set out in that the Cryptoasset Taskforce report as the right way to facilitate innovation while protecting consumers and firms.”
John Glen avoided replying to questions about the number of responses to the FCA’s consultation restricting the sale to retail clients of investment products that reference cryptoassets and the number of formal complaints the FCA has received from consumers in relation to the (a) sale and (b) distribution of Exchange Traded Notes that reference cryptoassets.
Let’s recall that, when the FCA launched its consultation it said it believed that retail consumers cannot reliably assess the value and risks of derivatives (contracts for difference, futures and options) and exchange traded notes (ETNs) that reference certain cryptoassets. This is due to the:
- inherent nature of the underlying assets, which have no reliable basis for valuation;
- prevalence of market abuse and financial crime (including cyberthefts from cryptoasset platforms) in the secondary market for cryptoassets;
- extreme volatility in cryptoasset prices movements;
- inadequate understanding by retail consumers of cryptoassets and the lack of a clear investment need for investment products referencing them.
The regulator said back then it estimates a ban could reduce harm by £75m to £234.3m a year for retail investors.