Under new proposals outlined by the Financial Conduct Authority (FCA) on Wednesday, crypto firms in Britain could be exempted from certain rules that require financial services companies to act with integrity and in the best interests of their customers. This move comes after Britain signaled in April that it would cooperate with the United States on the best approach toward digital assets.
In a consultation on minimum standards designed to help fast-growing crypto firms compete internationally, Britain’s financial regulator is suggesting waiving four of its key principles for crypto asset trading platforms. These principles include that firms must operate with integrity, with skill, care and diligence; that they pay due regard to customer interests; and that they take reasonable care to ensure advice and discretionary decisions for customers are suitable.
Striking a Balance
“We want to develop a sustainable and competitive crypto sector—balancing innovation, market integrity and trust,” said David Geale, the FCA’s executive director of payments and digital finance. While acknowledging that crypto assets are generally high-risk and volatile, the regulator stated that customers should still be protected from poor business practices.
The FCA’s proposals, Geale said, “won’t remove the risks of investing in crypto, but they will help firms meet common standards so consumers have a better idea of what to expect.”
The regulator is also proposing tougher rules in areas such as operational risk. The FCA pointed to the $1.5 billion hack on Dubai-headquartered cryptocurrency exchange Bybit in February as a clear example of the need for “strong operational resilience controls.” The regulator is seeking feedback on whether the consumer duty—which requires firms to put their customers first—and customer access to the Financial Ombudsman Service for compensation should apply to crypto asset firms. According to the government, around 12% of British adults either own or have owned cryptocurrencies like bitcoin or ethereum, up from 4% in 2021. The deadline to provide feedback on the consultation is November 12.
