The British financial regulator is preparing to ban retail investors from using borrowed funds such as credit card sales to invest in cryptocurrency because it seeks to revise the supervision of the rapidly growing digital asset market.
The arrow values of virtual currencies such as Bitcoin after the Donald Trump elections exerted pressure on the Financial Conduct Authority (FCA) to take a more difficult line while laying the foundations for the development of industry in the United Kingdom.
According to a recent Yougov survey, the proportion of people in the United Kingdom using funds borrowed to make cryptography purchases more than doubled by 6% in 2022 to 14% last year.
Borrowing to finance investments, when asset values could change considerably, meant that consumers have risked losing their full investment and potentially other assets, such as their home. These characteristics looked closely at the game, according to the Treasury Committee.
The proposed ban should face the resistance of certain Fintech companies. Meanwhile, ministers presented draft laws that will extend the existing financial regulation to companies involved in the crypto, aligning the United Kingdom with the United States rather than the EU.
The Chancellor, Rachel Reeves, said that after a recent visit to Washington, she had discussed the regulation of cryptography with the American secretary of the Treasury, Scott Bessent, and that the two countries planned to discuss the subject in June.
Bessent is known to be Pro-Crypto and, with Trump, is contrary to the proposals of a digital currency from the Central Bank. By rejecting the concerns that private companies such as Meta, Google and Apple could control digital currencies in the future, he told a hearing of the Senate financing committee in January: “I do not see any reason for the United States to have a digital currency of the Central Bank.”
The euro zone finance ministers said last month that they feared that the American position could affect monetary sovereignty and financial stability in the euro zone.
In the United Kingdom, the Starmer government has undergone pressure from the Labor Party to take a more difficult line. In 2023, the deputies of a parliamentary committee to all the parties urged ministers to deal with retail investments in cryptocurrencies such as Bitcoin as a form of play.
As part of its growth strategy, Reeves called for a relaxation of regulations in certain regions, an approach supported by the Director General of FCA, Nikhil Rathi, who suggested that the rules in the square mile could be simplified to stimulate innovation.
David Geale, executive director of digital payments and finance at the FCA, said that Clear Crypto regulations would increase trust in the sector, supporting growth.
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“Crypto is a growing industry. Currently unregulated, we want to create a cryptographic regime that gives businesses the clarity they need to innovate in complete safety, while offering appropriate levels of market integrity and consumer protection,” he said.
Citing concerns about market manipulation, conflicts of interest, lack of transparency and unreliable trade systems, Geale has added: “Our goal is to stimulate the lasting and long-term growth of crypto in the United Kingdom. We ask if we had the right balance. ”
The legislation will give surveillance powers to supervise all the financial and digital financial companies, including crypto trading platforms, intermediaries, lenders and crypto-active borrowers.
