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The United Kingdom’s Wisming Watchdog plans to ban retail investors borrowing money to invest in cryptocurrencies like Bitcoin because it seeks to bring the market for rapid growth assets for the first time.
Friday, restrictions on loans for crypto purchases are part of a set of rules of rules described by the Financial Conduct Authority, a few days after the government presented its plans to legislate for the digital asset market.
“Crypto is a potential field of growth for the United Kingdom, but it must be well done,” said David Geale, executive director of Payments and Digital Finance of the FCA. “To do this, we must provide an appropriate level of protection.”
Rejecting complaints by certain cryptographic asset companies that the FCA is hostile to their industry, Geale said: “I would compare in a way that other high -risk investment, which often has fewer protections … We are open to business.”
The FCA proposals aim to provide a large part of the cryptography market as part of its regulatory discount, including trading platforms, intermediaries, crypto lenders and borrowers and decentralized financing systems. The plans apply a set of much more difficult rules to the cryptography services provided to retail investors than those who deal only with professional or sophisticated investors.
Detail customers can choose to be treated as elective professional customers, giving them more freedom in the way they invest but less protections. Most people must meet at least two of the three criteria: having more than £ 500,000 to invest, carrying out at least 10 trades per quarter in the past year and having at least a year as finance professional.
“We started from a position to want to develop something that is safe and competitive,” said Geale. “If we can get the regulatory scheme, it really becomes attractive for businesses. This is what we are trying to achieve. ”
The FCA said that it planned to prevent companies from lending consumers to finance their crypto purchases – including via credit cards – due to the regulator’s concern about “unsustainable debt, especially if the value of their cryptographic assets decreases and that they were counting on its value to reimburse”.
The proportion of people in the United Kingdom funding the purchases of crypto per loan has more than doubled, from 6% in 2022 to 14% last year, according to a recent Yougov survey.
The FCA also said that it planned to prevent retail investors from accessing specialized specialized lenders and borrowers such as Celsius Network, which collapsed in 2022 in the midst of a broader crisis in the sector.
The regulator has listed a certain number of concerns concerning the market for the negotiation of cryptographic assets, in particular market manipulation, conflicts of interest, default of regulations, lack of transparency, illiquidity and unreliable negotiation systems.
To fight against some of them, the FCA will require crypto trading platforms to treat all trades equally, to separate their own negotiation activities owned by those carried out for retail investors and ensure the transparency of prices and the execution of transactions.
It will prohibit negotiation platforms from paying intermediaries for the order of orders and will oblige all companies to offer crypto trade to British consumers to operate through an authorized legal entity in the country.
Consumers who park their cryptographic assets with “markup services” in exchange for a return must be reimbursed for any loss caused by third -party shares.
Decentralized financing systems, which have no centralized operation and only perform on computer code lines, will be exempt from the new FCA regulations unless you have a “clear control person”.
Although the warning “The majority of cryptographic assets will remain at high risk – speculative investments and consumers should be ready to lose all their money if they buy them”, the FCA said that its objective was “to encourage growth as far as possible”.
Cryptographic companies have become frustrated by the FCA on the high level of refusal in the registration program of the regulator to comply with its anti-flowage rules.
The regulator rejected 86% of these applications in the 12 months until April 2024, but during the last financial year, this proportion fell to 75%.
Crypto leaders have supported FCA’s attention to consumer protection.
“As such an internationally influencing regulator, as soon as the FCA begins to regulate the cryptography market, they give it a solid approval stamp – so I understand their prudence,” said Joey Garcia, public affairs manager for Xapo Bank, a goalkeeper of Gibraltar.
Riccardo Tordera -Crichi, Director of Policy and Government Policy and Relations at the Association of Payment, a commercial organization, said: “The government says that it is open to business, but in practical terms, it will be difficult for the FCA to implement this – they do not have easy work.”
Companies have until June 13 to respond to the FCA proposals.
