Crypto exchange Gemini has warned the UK financial regulator that draft rules for digital asset adverts risk encouraging firms to relocate offshore.
The Financial Conduct Authority is today closing a consultation on tough new rules to regulate the promotion of high risk assets, including crypto, in the UK. The head of Gemini UK, Blair Halliday, warned the regulators that draft proposals fail to provide incentives for firms to register with the UK’s financial watchdog.
“The motivations behind the FCA and HMT’s proposals to strengthen financial promotions are positive,” commented Halliday.
“However, in practice, there is concern that certain aspects of these proposals place FCA-approved crypto asset firms at a competitive disadvantage, and may even have the unintended effect of encouraging firms to base themselves offshore, rather than seeking to be registered and approved with the regulator here in the UK,” Halliday said, noting that some firms have already left the country.
Halliday noted that under current FCA proposals businesses registered under the regulator’s anti money laundering framework will be treated in the same fashion as unregulated firms when seeking approval for adverts from the regulator.
“In this proposed set up, there is no differentiation between companies who have chosen a path to be UK-domiciled within the FCA’s oversight, and crypto firms based outside of the UK,” Halliday said. “Equally concerning is that this also applies to firms whose AML programmes the FCA has already rejected. All are allowed to market to UK consumers.”
Halliday called on the regulator to develop a “fulsome crypto asset framework” which provides a clear pathway for digital asset firms to offer services in the UK market.
By contrast, analysts at Hargreaves Lansdown welcomed news that the regulator plans to restrict the marketing of high risk assets such as crypto to mass audiences.
“It’s clear the FCA recognises the damage that can be done to overall investor confidence when high risk investments are bought by people without being clear of the risks,” commented Nathan Long, senior analyst at Hargreaves Lansdown:
“There’s also room for the FCA to go further, an outright ban on using credit cards to buy higher risk investments would be sensible, as would a greater burden on firms to police maximum allocations and report on the buying experience on a regular basis,” Long added.