The chair of the UK’s top financial watchdog has questioned the role it should play in crypto regulation after hundreds of billions of dollars was wiped from the value of the market in the past month.
Charles Randell, chair of the Financial Conduct Authority, said in a speech that the watchdog could not simply swoop in and regulate “purely speculative speculative crypto tokens” and the the FCA needed to establish which areas of the market it would regulate.
“What would success look like if we also took on regulation of the issue and trading of purely speculative crypto tokens? Should people be encouraged to believe that these are investments, when they have no underlying value? When the price of Bitcoin can readily halve within six months, as it has done recently, and some other speculative crypto tokens have gone to zero?” he said
Randell said that regulating crypto needs a “workable operational plan” which the FCA is “fully signed up to delivering”, but he said it required realism about how long the FCA needs to prepare and how far many crypto firms will have to improve to continue operating under a new regulatory framework.
He also questioned how the FCA would fund the expansion of its remit into crypto.
The watchdog signalled its commitment to the innovation possible through crypto’s underlying distributed ledger technology however, as well as “properly regulated” stablecoins which are pegged to the value of real world currency.
His comments come as government prepares to push to make the UK a crypto capital, with City minister John Glen unveiling plans in February to make the UK “the very best place in the world to start and scale crypto-companies”.
But the market has cratered in recent weeks with more than $200bn wiped from the value of the market in a single day last week. The value of bitcoin plunged to its lowest level since December 2020, while Luna shed almost its entire value.