FTX collapse calls for ‘prudential regulation’ in UK | Daily News Byte

FTX collapse calls for ‘prudential regulation’ in UK

 | Daily News Byte


The collapse of FTX is seen as a cautionary tale and a precursor to more prudent regulation by public and private sector players in the United Kingdom.

Bank of England Deputy Governor Sir John Cunliffe made headlines ahead of the Christmas weekend in an interview with Sky News, outlining his belief that investors seeking exposure to cryptocurrency markets in the UK need to be given more protection.

Cunliffe emphasized that potential cryptocurrency users and investors should have a framework for investing in the asset class that ensures the same consumer protection and integrity as traditional financial markets.

The Deputy Governor highlighted the increased interest in cryptocurrency markets from financial institutions and retail users as the driving force behind the need for greater regulatory oversight in the country:

“We had banks and investment funds and others who wanted to invest in it and I think we should be thinking about regulation before it gets integrated into the financial system and becomes a systemic problem.”

Cunliffe also used the collapse of FTX as an example where existing regulatory parameters guiding the traditional finance sector may have protected out-of-pocket users.

“We saw client money go missing, conflicts of interest between different operations, transparency, auditing and accounting.”

Drawing parallels with the gambling sector in the UK, Cunliffe said investors should have access to a regulatory environment that prevents them from losing access to funds as happened in the collapse of FTX.

Related: UK Crypto Bill to Ban Services from Abroad: Report

The Cinetelegraph caught up with Mitch Machigian, a partner at investment firm Blockchain Coininvestors, to gain further insight into the current regulatory environment for cryptocurrencies and the blockchain ecosystem in the UK.

Based in London, the Michiganian highlighted his view that financial institutions and regulators continue to see value in blockchain technology and digital assets in the post-Brexit British economy:

“British financial institutions and banks – many of which are already investing heavily in blockchain technology – continue to participate in the digitalisation of commerce, starting with digital assets, money and commodities.”

FTX’s collapse highlights the importance of ‘prudent regulation’, according to Mechigian. He added that astute regulators in both the United States and the UK are drawing a clear distinction between ‘off-shore and fraudulent’ enterprises like FTX and legitimate blockchain technology solutions that facilitate the digitalization of assets, finance and commerce.

2022 has been a tumultuous year for politics in the UK, with three different Prime Ministers taking office within months of each other. Despite the ‘political economic chaos’, Michigan said parliament is moving towards passing the Financial Markets and Services Bill, which would recognize cryptoassets as financial instruments.