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LONDON, Dec 7 (Reuters) – Lessons will be quickly applied from the collapse of crypto exchange FTX that hurt 80,000 UK investors even though the platform was not registered in Britain, the UK Financial Conduct Authority said on Wednesday.
Matthew Long, the FCA’s first director in the newly created Digital Assets Unit, said FTX combines issuing tokens, trading, wholesale market activity and fund security in one place.
“In our view, it’s extremely dangerous because you can have interactions between each of those things, which in other regulated areas would be separate legal entities or ‘sterile’ corridors so they can’t effectively influence each other,” Long told Parliament’s Treasury Select. committee.
“We need a regulation that deals with those sterile corridors so we don’t see what we’ve seen.”
The FCA, along with other global regulators at IOSCO, an umbrella group for securities watchdogs, is looking at how those activities can be covered separately by best practice rules, with recommendations to members in mid-2023, Long said.
Long said the regulators’ response to the FTX debacle would be “pace.”
IOSCO chairman Jean-Paul Servais told Reuters last month that past experience with regulatory firms such as credit rating agencies would be used to deal with conflicts of interest at crypto “organizations” like FTX.
Britain is approving a Financial Services and Markets Bill that would give the FCA powers to regulate the crypto market, with the Ministry of Finance likely to issue a public consultation on “world-leading” rules as early as Friday.
The European Union is also finalizing its own crypto regime.
Crypto dealings are currently unregulated in Britain, with firms only required to show they can comply with anti-money laundering regulations.
“In terms of dark money, there’s money laundering that’s going on through crypto,” Long said.
Sarah Pritchard, the FCA’s executive director for markets, told the committee that crypto promotions will be regulated like other “high risk” investments, warning that investors should not invest unless they are prepared to lose their money.
Reported by Hugh Jones; Editing by Hugh Lawson
Our Standards: The Thomson Reuters Trust Principles.
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