Nikhil Rathi, CEO of the Financial Conduct Authority, has said "clear lines" are needed around crypto, while also launching an increased supervisory approach for newly authorised firms.
"We need clarity around ruling out future Financial Services Compensation Scheme (FSCS) coverage for investment losses from crypto, even when advised," he commented. "As we have consistently warned, if you invest in crypto, you need to be prepared to lose all your money."
Speaking at a City Week event in the Guildhall , he highlighted that most adults do not know crypto is not regulated by the FCA "apart from our narrow remit on ensuring anti-money laundering rules are upheld".
Rathi (pictured) added the FCA is currently limited in the protection it can offer as firms it rejects can still service UK customers from offshore.
"While we have been encouraged to see partner agencies follow our lead when we have rejected firms' registrations, it is not enough to rely on our global influence," he said. "This needs wider consideration by policymakers."
HM Treasury launches UK Transition Plan Taskforce
The CEO added that he "welcomed" the UK Government's recent announcement of a "flexible approach to regulation so we can proportionately deal with any risks that emerge and to receiving new powers over the promotion and marketing of high-risk assets, like crypto".
The regulator said it had rejected many crypto firms' registrations because they "had inadequate provision to prevent harm or even identify it in the first place".
Rathi went on to say it is helping firm improve their capabilities and 33 crypto firms have gained registration from the FCA. However, firms "that could not or would not meet the standards didn't make it through".
Launches 'Early and High Growth Oversight' approach
Today (26 April) the FCA also launched an approach called ‘Early and High Growth Oversight'. This followed a "successful pilot" and will support 300 newly authorised firms over 2022 to 2023.
The objectives of the approach are to: spot harm or misconduct; raise standards; promote competition; and better firm experiences.
The approach "provides enhanced supervision for firms as they get used to their regulatory status and supports them to understand their obligations so they can meet the standards we expect as they grow," according to the FCA website. "It will also ensure that we can identify and address harm developing in newly authorised firms quicker."
