To "detoxify" crypto to eliminate conflicts of interest, protect user money, and compel dramatic changes to business models, Britain's financial watchdog said on Wednesday that tough rules were required.
Ashley Alder, the new chair of the Financial Conduct Authority (FCA), stated that crypto regulations should be as tough as those for risky activities in traditional finance. This year, Britain aims to regulate cryptocurrency under a new financial services law.
Alder stated that a regulatory regime identical to that of conventional finance will dramatically alter crypto business models.
"One of the questions in my mind is when you put in place a regulatory framework around crypto, the interesting aspect is the degree to which crypto will need to adapt and effectively detoxify to fit into that regime" he continued.
The FCA rejected almost 85 percent of crypto businesses seeking license to operate in the United Kingdom because they did not comply with basic anti-money laundering safeguards.
Alder informed the Treasury Select Committee of the British Parliament that some firms in the sector were evasive, with near-deliberate multiple conflicts of interest and significant concerns over the proper safeguarding of customer assets.
As a result of the decline in bitcoin's value, regulators have adopted a tougher stance on the sector, and the collapse of crypto exchange FTX revealed how many operations were conducted without safeguards under one roof.
To protect customers, the FCA and police have also raided suspicious unlawful crypto cashpoints in London.
Lawmakers urged Alder to answer to a letter from his predecessor, Charles Randell, to the committee, in which he stated that "speculative crypto is gambling pure and simple" and should be regulated and taxed as such, with levies supporting debt advice and addiction services.
"If the issue and trading of speculative crypto are instead treated as financial services, conferring the ‘halo’ of financial services regulation, then increased consumer loss and calls for compensation provided by taxpayers or financial services levy payers will inevitably follow," Randell stated.
By fLEXI tEAM