The FCA progressively takes hard line onto crypto companies to protect investors from Cryptocurrency Scams.
According to the Financial Conduct Authority estimation, consumers have lost at least £27m in crypto and foreign-exchange scams. This figure shows that there is a 74% increase from the number of inquiries recorded as compared to those recorded between October 2017 and October 2018. By now, the FCA now has initiated 87 inquiries into crypto companies, in comparison to 50 this time last year, according to The Telegraph.
These 87 probes include early-stage scrutiny as well as full-blown enforcement investigations.
“The increased scrutiny reflects the FCA’s increasingly hands-on and no-nonsense approach to enforcing the law in the cryptocurrency market.”, said David Heffron, who is a partner at the law firm named Pinsent Masons, and also obtained the data from the FCA. However, he declined to comment any further on the statistics.
They want bad actors taken away so that consumers can have greater confidence in cryptocurrency businesses acting lawfully. The FCA is taking a hard line on companies that pass the responsibility of cryptocurrencies and related products on the public. This increase in supervisory scrutiny is one of the efforts to fight the get-rich-quick schemes which came into effect in when bitcoin rose above £10,180 in June, before it fell back to about £6,600 now.
Scammers, especially internet con artists, can easily set up a cryptocurrency business, as they require almost no physical assets but the popularly growing virtual currencies. Scams even involve social media, fake endorsements by well-known public figures and pictures of luxury items.
Victims are then convinced to make their first investment, and then later the course, encouraged to invest even more with the false promise of higher profits, as they are directed to professional-looking websites. In time, however, customer is deceived, as the revenues stop coming, the account is closed, and the scammer disappears without any further communication.
Mostly, the cryptocurrency consumers are those men aged between 20 and 44, who belong to the middle to upper class, according to an earlier FCA research.
As of now, if anything goes wrong, the transfer, purchase and sale of cryptocurrencies is not regulated and covered by any government-enacted consumer protection programs in the UK.
Although, FCA authorization and verification will be required by the companies to sell regulated investments with an underlying cryptocurrency element, depending on their activities, to avoid falling victim to cryptocurrency scams. In this way, the FCA continues to exert greater pressure on the industry, which some stakeholders say will benefit the market as investors would do well to verify all legitimate crypto investment schemes.
In July, the regulator plans to move forward with the ban of cryptocurrencies derivatives for retail investors, warning that it is out of question to value them reliably now but full of risk, and that trading them is similar to gambling. The FCA has already finished considerations and also foresees a ban in 2020.
The regulator emphasized that as the UK investors were not well-informed on the crypto industry, they faced being charged high fee to an estimation of £75m over the 19-month period, for which the cryptocurrencies were put under review. It also had concerns about the aftermaths of this “financial crime” prevailing all over, that had earlier been underscored by previous statistics from the FCA.
Besides the FCA, inter-governmental, and several international, national and regional authorities have also been turning up the pressure on the cryptocurrency avenues and putting the crypto regulations at the frontline of their activities, under the form of battling these scams.
In the meantime, when the focus of these regulatory measures is to make anti-money laundering (AML) efforts, many reports also show that the conventional banking system is the preferred channel for guiding the illegal money.
How do you think will the increased regulatory pressure by the FCA help or hurt the UK’s cryptocurrency space? Comment below.