The UK government says it has no power to interfere with any decision by the Financial Conduct Authority (FCA) regarding the fate of crypto derivatives. This report comes amid speculation that the financial watchdog is moving to ban crypto derivatives over investor protection concerns.
Meanwhile, several stakeholders have urged the FCA to reconsider its stance on the matter. Some commentators say a ban will only force digital innovation out of the UK and into friendlier regulatory environments.
UK Govt Maintains FCA Independence
According to FinanceFeeds, the UK government doesn’t plan to get involved with the activities of the FCA as it relates to cryptocurrency regulations. Responding to questions on Monday (October 21, 2019), John Glen, Economic Secretary to the Treasury maintained that the FCA is an independent body.
“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.”
For Glen, the executive is in support of whatever approach the FCA decides to take in dealing with crypto derivatives trading.
Crypto Derivatives Nuanced Regulations
Since the report of an impending crypto derivatives ban by the FCA emerged, several cryptocurrency stakeholders in the UK have taken issue with the regulator’s stance. As previously reported Blockonomi, the World Federation of Exchanges (WFE) declared that a ban on crypto derivatives wasn’t a good idea.
According to the WFE, the FCA should adopt a more nuanced approach to dealing with crypto derivatives warning that an outright ban would affect its members who are already in compliance with a slew of regulatory standards.
Rather than pursuing an outright ban, the WFE declared that the FCA should look for ways to balance the need for investor protection while not seriously harming the UK’s crypto market.
However, the FCA continues to maintain its stance on the matter, stating that the move is in the interest of retail investors. According to the FCA, a ban on crypto derivatives could lead to a $96 million haircut in harm done to retail traders per year.
Regulators Pursuing Stricter Cryptocurrency Laws
The FCA isn’t the only regulator ramping up efforts to combat fraud in the cryptocurrency market. Elsewhere, the Financial Crimes Enforcement Network (FinCEN) in the United States is paying even greater attention to bitcoin and cryptos.
As reported by Blockonomi, FinCEN director, Kenneth Blanco said that cryptos provide a conduit for illegal activities. Thus, businesses operating in the industry must comply with regulatory provisions like know your customer (KYC) and anti-money laundering (AML).
The FinCEN chief also said the industry must adhere to the Bank Secrecy Act and that crypto firms cannot operate outside the law. These comments add to the increasing scrutiny around the virtual currency sector as governments and regulatory agencies continue to shine a brighter spotlight on the market.
These stringent regulatory policies have begun to have a marked effect on the market in countries like South Korea. Meanwhile, several crypto businesses have been forced to adopt these policies or risk going out of business.
In response, several stakeholders in the industry have recommended the creation of relevant self-regulating organizations (SROs). However, the jury is still out on whether government authorities would be willing to work with these SROs in the creation of a mutually beneficial regulatory framework for the crypto space.
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