The UK’s Financial Conduct Authority (FCA) is facing criticism from the National Audit Office (NAO) for its slow and ineffective regulation of the cryptocurrency industry.
The NAO issued a report named “Financial services regulation: adapting to change” on December 8, 2023, accusing the FCA of being sluggish and unresponsive to the emerging risks and challenges posed by digital assets.
The report pointed out that the FCA took nearly three years to enforce action against illegal crypto ATM operators, which allow users to buy and sell digital currencies with cash. The FCA shut down 26 crypto ATMs in July 2023 as part of a coordinated investigation with other agencies.
While the FCA has required crypto-asset firms to comply with anti-money laundering regulations since January 2020, and began supervision work including engaging with unregistered firms, it did not begin taking enforcement action against illegal operators of crypto ATMs until February 2023, the NAO stated.
FCA Lacks Crypto Skills And Resources
The report also blamed the FCA’s delay in registering crypto firms under money laundering regulations on the lack of crypto skills and resources within the regulator. The FCA has only approved 41 out of the 300 digital asset firm applications that have applied for regulatory approval since January 2020.
According to the report, a deficiency in expertise related to digital currencies resulted in a delay for the FCA to register firms dealing with these assets under money laundering regulations.
The report acknowledged that the FCA had taken some steps to improve its digital asset regulation, such as releasing a “finalized non-handbook guidance” for digital asset firms to comply with the new crypto promotion rules that came into effect.
The new rules aim to prevent digital asset firms from misleading customers about the benefits and risks of using digital currencies and require them to display clear and prominent risk warnings.
The report concluded that the FCA needs to adapt to the changing digital asset landscape and enhance its capacity and capability to regulate the industry effectively and efficiently.
The report also urged the FCA to be more proactive and agile in responding to the evolving virtual currencies market and technology and to engage with the public and the industry to raise awareness and understanding of digital assets.
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