INVESTIGATIONS INTO CRYPTOCURRENCY SURGES AMID REGULATOR CRACK DOWN
The number of FCA investigations into cryptocurrency businesses has surged over the past year as the regulator continues its crackdown on the controversial digital currencies.
The number of live investigations by the financial regulator into the sector rocketed 74% to 87 as of September 2019, up from 50 a year earlier, according to new research by international law firm Pinsent Masons.
Huge fortunes have already been made by early investors in cryptocurrency, but the law firm warned this makes private clients particularly susceptible to fraudsters targeting the industry.
The FCA has previously warned that fraud is a significant issue in the sector, with estimates from the watchdog suggesting individuals in the UK lost £27 million to cryptocurrency and forex investment scams in the past year.
While increasing investigations into potentially fraudulent businesses, the FCA has also increased with legitimate cryptocurrency firms to assess whether their products require authorisation.
In June, Facebook announced plans to launch its own cryptocurrency Libra, but was warned by the watchdog that the launch will warrant intense scrutiny.
David Heffron, partner, at Pinsent Masons, said: "The rise in investigations reflects the FCA's increasingly hands-on and no-nonsense approach to enforcing the law in the cryptocurrency market.
"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."
In July, the FCA proposed a ban on financial instruments linked to cryptocurrencies such as bitcoin.
It warned that products such as derivatives and exchange-traded notes (ETNs) that reference crypto-assets could cause huge losses for retail customers unlikely to understand their risk or value.
The regulator said the products were "ill-suited" to small investors due to their "extreme volatility" and the difficulty in valuing them.
In the US, regulators have also taken a hard line on cryptocurrencies, with the Securities and Exchange Commission recently issuing hefty penalties to unregistered firms in the industry.Published: by Radio NewsHub