Crypto & Tokens Still Offer Money-Laundering Opportunities

Here are some extracts from a speech given by Charles Randall, Chair of the FCA, which offers an insight into the risky business of cryptocurrencies and tokens.

“At the FCA we have repeatedly warned about the risks of holding speculative tokens. To be clear: these tokens are not regulated by the FCA. They are not covered by the Financial Services Compensation Scheme. If you buy them, you should be prepared to lose all your money.

But around 2.3 million Britons currently hold this type of token. Worryingly, 14% of them also use credit to purchase them, thereby increasing the exposure to loss. And 12% of them, so around a quarter of a million people, seem to think that they will be protected by the FCA or the Financial Services Compensation Scheme if they go wrong. They won’t.

So the potential level of consumer harm that these purely speculative tokens bring raises the question of whether the activity of creating and selling the tokens themselves should be brought within FCA regulation.”

MONEY LAUNDERING RULES

“The FCA currently has a limited role in registering UK-based cryptoasset exchanges for anti-money laundering purposes. Exchanges can be used to launder the proceeds of crime and we must contribute to the global effort to address financial crime by demanding that businesses with a UK presence meet the necessary standards.

While some of the business which have applied to us have shown evidence of adequate systems and controls, many others fell well short of acceptable standards and many have withdrawn their applications as we have scrutinised them. The state of those firms ignoring the requirement to register with us or which have moved off-shore to avoid registration could be even worse.

We have published a list of unregistered crypto exchanges that we suspect are operating in the UK, to help consumers avoid using them. Banks and other authorised firms should be very wary of transactions involving unregulated crypto exchanges wherever they are based, and should use the list of suspect UK businesses to identify customers and transactions which may be money laundering.”

COMMENT;

Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown

‘’It’s unusual to hear the chair of Britain’s financial watchdog dedicate a big chunk of his speech to superstar realty TV queen Kim Kardashian – but it shows just how concerned the FCA is about the level of financial promotion of crypto assets on social media. The watchdog is clearly horrified at the lack of controls implemented by major social media platforms and has urged them to crackdown on posts which aren’t clearly identified as promotions. It reckons given the seriousness of the situation legislation forcing them to do so should be the solution, highlighting that the current Online Harms bill just won’t go far enough.

The FCA is singing from the same song sheet as many other international regulators. It sees investing in crypto currencies as extremely high risk. The watchdog had already been quick to warn investors that they could risk losing all their money if they indulge in crypto currency trading.  It’s worried that too many financially vulnerable people are being lured into ‘get rich quick’ schemes, with 14% getting into debt to speculate in crypto assets. The FCA has now warned that by bringing crypto currencies into the regulatory sphere, it risks adding more perceived legitimacy to the currencies.

Now it appears to be throwing its weight behind recommendations made by the influential Basel committee which brings together regulators from around the world.  If banks and other regulated financial institutions dabble in crypto, the committee is considering making them put aside enough capital to cover 100% of potential losses. Giving speculative tokens a high risk price tag is likely to make crypto currency dealing and investment very expensive and could limit the number of new institutional entrants into the crypto world.

It’s likely lower financial buffers would be needed for stable coins, which are seen as less volatile as they are pegged to currencies like the dollar. It is clear the FCA wants to push the financial industry towards these digital assets, seeing them as a useful way to improve the payments market away from the crypto Wild West.’’

About alastair walker 6830 Articles
20 years experience as a journalist and magazine editor. I'm your contact for press releases, events, news and commercial opportunities at Insurance-Edge.Net

Be the first to comment

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.