The Chair of the UK's financial watchdog told the UK parliament they must implement tougher rules to "detoxify" the crypto sector, protect consumers, and eliminate conflict of interests.
Ashely Alder, the new Chair of the UK's Financial Conduct Authority (FCA), said the UK parliament needed to implement stricter rules for the crypto industry.
At the hearing before the House of Commons Treasury Committee, Alder said that the crypto sector should be under strict scrutiny as the mainstream financial sector. The UK is working to regulate crypto under a new Financial Services and Markets Act, which is set to be passed later this year.
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According to Alder, crypto business models will have to evolve radically in the UK under the new rules. He said:
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.
A committee member expressed concerns that regulation would legitimize the crypto sector. According to Alder, while he agreed with the opinion, the FCA Chair highlighted that there was no option but to regulate the industry. He said that concerns regarding money laundering can't be addressed without proper laws.
The Financial Services and Markets Act will empower the FCA to oversee the crypto sector when it passes. However, the FCA's CEO, Nikhil Rathi, does not think that will be enough to eliminate the crypto sector's risk to consumers. He added that most people owned only a few hundred pounds of crypto.
Under a new licensing regime established by the FCA in January 2023, only 14% of firms that applied for a license have met the standards.
According to Rathi, the majority of applications were rejected for not complying with the requirements. On top of that, some firms had conflicts of interest and lacked consumer safeguards.
In February, UK FCA revealed its plans to tighten crypto advertising rules.
