In a speech delivered early today by the Financial Conduct Authority Chief Executive Nikhil Ratha, the top UK regulator addressed the future of regulation. Of course, the digitization of financial services, including crypto assets was in the mix. Ratha noted that the FCA has invested heavily in technology and now scans 100,000 websites for fraud every day.
Ratha said they are “redesigning” their operational platform to “address the threats, mitigate the shocks, and embrace opportunities.” New tools are designed to speed up case management and better visibility of risk in each firm.
“We are embarking on a new approach to digital regulation in the UK through our Digital Regulators Cooperation Forum bringing us together with our communications, privacy, and competition regulators. We are testing our powers to the limit and where we lack them, using our influence and other means to affect change. We secured agreement from Google that it would not permit non-FCA verified firms to advertise financial products on its platform. We sounded the alarm over supervising Binance and placed restrictions on it so it could not undertake any regulated activity in the UK without written consent. Many of the issues we face also require an international response. We greatly value ongoing enforcement cooperation between the FCA and US agencies, including the SEC, CFTC, and DOJ in particular, which has created an important set of precedents that demonstrate the ability to act effectively on a global basis.”
Regarding crypto, Ratha said there existed both opportunity and risk. He noted that dozens of blockchain firms have participated in their regulatory sandbox and they have organized three ‘cryptosprints” that have engaged with almost 200 participants. The ability of innovators, academicians, and public officials is key. As for specific regulation, Ratha said the industry desires a prescriptive regime but this is a “matter that is not up to us to decide.”
Vital to a robust regulatory approach is the UK’s relationship with the US as these two countries represent two of the largest financial centers in the world that a re highly interconnected. Ratha noted that the UK and US recently held talks as part of the US-UK Financial Innovation Partnership in London.
“We agreed to deepen ties on financial innovation after exchanging views on crypto-asset regulation and market developments – including in relation to stablecoins and the exploration of central bank digital currencies.”
None of this should come as any surprise as Fintech has challenged regulators globally, and the UK as the leading Fintech hub must step up its services to enable innovators while protecting consumers and guarding against risk.
Lars Seier Christensen, chairman of the Concordium Foundation, founder of Saxo Bank, and blockchain advocate, shared the following thoughts on the speech delivered by Rathi:
“Regulation is very important for mainstream adoption and broad engagement. We have learned this lesson many years ago in the traditional finance markets. So it is great that this understanding is also spreading in the crypto communities.
Compliance with many different regulatory environments across multiple jurisdictions can, however, be very onerous. So the more crypto regulation can be leveled across jurisdictions, the better. The EU, for example, has a unique opportunity to implement a union-wide regulatory framework in an area that is not already burdened by national interests and ingrained systems.
If the US and the UK can also collaborate, this would be very beneficial, in particular, if it could to some extent be coordinated with the EU.
What is important here is that every national agency doesn’t just pile on more and more restrictions to their liking, but rather the other way around, that appropriate and generally agreed regulations are harmonized.
“It is very important to have consumer protection, ID, AML and general accountability measures in place, but regulators should avoid overburdening an embryonic industry and stifle innovation.”