FTX and Celsius Network’s collapse wiped out billions from the crypto market, leading to concerns over consumer protection from potential losses. The Financial Conduct Authority (FCA), the UK’s financial regulator, has revealed its inability to create a regulatory framework for crypto investors that could protect them from losses.
FCA CEO Nikhil Rathi appeared before the Treasury Select Committee during an inquiry session on Wednesday, where he admitted that the agency currently has powers to ensure crypto companies register and comply with anti-money laundering rules, but it doesn’t have the ability to protect consumers from any losses they might suffer. The Financial Services and Markets Bill that’s currently under debate in parliament and is expected to become law in April will give the FCA more power to regulate crypto, but consumer loss protection won’t be included.
“Whatever we do on regulation, we are not going to be able to put in place a framework that protects consumers from losses, and we absolutely and under no circumstances whatsoever should people expect compensation through this,” said Rathi.
The collapse of FTX and Celsius Network has affected 80,000 UK crypto traders. However, Rathi called most of the applications submitted to the FCA “exceptionally poor” and said the agency needs to do a better job communicating its expectations, something it began to do in January.
The newly appointed FCA chair, Ashley Adler, has also expressed concerns about the crypto industry and called for “tough” regulatory oversight. The crypto industry, according to Adler, needs to “detoxify,” which is only possible through better regulations and consumer protection.
However, the UK’s approach towards crypto has been more positive than many other countries. The country has already passed a law mandating the regulation of crypto assets by the FCA. In addition, the FCA has granted licenses to 51 crypto firms in the past six months, and only 14% of applications were rejected.
While the UK’s approach to crypto is positive, the FCA’s inability to protect consumers from potential losses is a significant concern for investors. Therefore, it is essential to develop a robust regulatory framework that provides better protection to consumers. The Financial Services and Markets Bill currently under debate could provide the FCA with more power to regulate crypto, but it is essential to prioritize consumer protection in the regulatory framework.