Out-Law News | 07 Oct 2019 | 2:29 pm | 1 min. read
David Heffron of Pinsent Masons, the law firm behind Out-Law, was commenting after data obtained by Pinsent Masons revealed that the number of live Financial Conduct Authority (FCA) investigations into cryptocurrency businesses has increased 74% from September 2018 to September 2019.
The FCA had 87 investigations ongoing into cryptocurrency businesses last month compared to 50 at the same time last year.
The FCA issued new guidance to help businesses carrying out cryptoasset activities in the UK to comply with financial services regulations in the summer. Heffron said the release of that guidance makes it clearer which businesses fall subject to FCA regulation and will help the regulator more accurately pinpoint cases for investigation.
"The rise in investigations reflects the FCA’s increasingly hands on and no-nonsense approach to enforcing the law in the cryptocurrency market," Heffron said. "It is notable that more than 40% of all investigations into unauthorised cryptocurrency businesses have occurred within the past 11 months. In some respects this in unsurprising, given that the FCA chair recently described fraud, particularly investment fraud, as having reached 'epidemic proportions'."
"For cryptocurrency businesses acting lawfully these statistics will be encouraging – they want bad actors pushed out. The FCA’s crackdown on businesses operating on its regulatory perimeter will instil a degree of confidence that products reaching consumers are less likely to be scams," he said.
Legitimate cryptocurrency businesses are being given help to test innovative products and services via the FCA's regulatory sandbox. More than a third (39%) of businesses accepted into the sandbox programme since its launch have been businesses engaged with cryptocurrency or blockchain activities, according to Pinsent Masons.
Heffron said: "The growth of the FCA’s sandbox scheme by cryptocurrency businesses is just one indication of the efforts being made by both businesses and the regulator to work together on these fast evolving products. For those cryptocurrency businesses looking to launch any product, engagement with the FCA is now an absolute necessity. If any business is unsure as to whether they require authorisation, then they should speak to a professional."
The FCA has estimated that individuals in the UK lost over £27 million, that it knows of, to cryptocurrency and forex investment scams in 2018/19.
05 Aug 2019