Laura Navaratnam

It may look like the Financial Conduct Authority is having its own moment during this global shift toward embracing crypto asset-backed financial products. However, the reality is more nuanced.&nbsp;



Last Monday, the FCA announced it would <a href="https://blockworks.co/news/bitcoin-etfs-in-uk">not object to some bitcoin-backed securities being listed</a> in the UK.&nbsp;



Is this a path for UK retail customers to invest in bitcoin funds? Not really.



It’s an interesting move from the FCA, which has historically taken a tough stance on any crypto asset-backed exchange traded products (ETPs). The FCA implemented a ban in 2021 on the sale of crypto-related derivatives, including ETPs, to retail investors. At the time, the FCA claimed that crypto had no inherent value, was highly volatile, and was associated with financial crime.



Last Monday’s more crypto-positive <a href="https://www.fca.org.uk/news/statements/fca-updates-position-cryptoasset-exchange-traded-notes-professional-investors">statement</a> almost certainly reflects mounting pressure from other jurisdictions, which are beginning to take a more pragmatic view of such products. For instance, the SEC in the US has recently allowed <a href="https://blockworks.co/tag/bitcoin-etf">spot bitcoin ETFs</a> to be sold to both institutional and retail investors.&nbsp;



Read more: <a href="https://blockworks.co/news/bitcoin-etf-snapshot-record-inflows">Bitcoin ETF snapshot: Segment’s week net inflows hit record $2.5B</a>



By providing another well-regulated method for investors to invest in bitcoin — as they can already do with other commodities such as gold or oil — the SEC is opening up the market and allowing the space to grow and evolve within a robust regulatory framework. As a result, a myriad of new ETFs are popping up for US investors.&nbsp;



A degree of movement for crypto is also happening in the EU. In Europe, virtually all digital assets ETPs are structured as ETNs, (rather than funds), due to regulation. Although we are unlikely to see products like bitcoins ETFs entering EU markets any time soon, similar products are being permitted for sale to professional investors. EU asset manager Jacobi <a href="https://blockworks.co/news/us-europe-spot-bitcoin-etf">listed BCOIN</a>, its bitcoin product structured as close as possible to an ETF (and marketed essentially as an ETF), in Amsterdam as of last August.&nbsp;



But does Monday’s statement demonstrate that the FCA is open to reviewing its crypto position? While markets have been quick to seize the announcement as an opportunity, there is reason to be more skeptical.&nbsp;



Read more: <a href="https://blockworks.co/news/bitcoin-etfs-in-uk">After US bitcoin ETFs, the UK fights for retail to have the same freedom</a>



First, the FCA saying it would “not object” to bitcoin-backed securities is not the same as saying it would allow them to be listed. The first test case of an REI actually listing a crypto asset ETN will be crucial, and it will be interesting to see what the FCA does.&nbsp;



Second, the FCA goes on to say in the same statement that “crypto derivatives are ill-suited for retail consumers due to the harm they pose. As a result, the ban on the sale of ETNs [&#8230;] to retail consumers remains in place.” No move toward the American approach there.



When the <a href="https://www.fca.org.uk/news/press-releases/fca-bans-sale-crypto-derivatives-retail-consumers">FCA’s ban</a> on the sale of crypto derivatives to retail consumers was introduced in 2020, the UK had minimal crypto asset regulation. Since then, the crypto asset ecosystem has changed dramatically, from both a commercial and regulatory perspective. Furthermore, the UK government has repeatedly reiterated its commitment to making the UK a global hub for crypto assets; a position which seems at odds with a blanket prohibition.&nbsp;



Given this backdrop, it makes sense that the FCA reconsider the ban on retail clients. We would welcome additional work on this as a priority, given that timelines for the future broader regulatory regime for crypto assets are unknown and likely to be a multi-year process.



<hr class="wp-block-separator has-alpha-channel-opacity"/>


<div class="wp-block-post-author-biography">Laura is a digital assets policy expert, and serves as the UK Policy Lead for Crypto Council For Innovation (CCI). CCI is the premier global alliance for advancing innovation, which believes in leading with a global view, advocating for inclusive regulation, and developing evidence-based insights to support government and business leaders. </div>


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No, the UK’s Financial Conduct Authority isn’t now pro-crypto ETF

Katherine Ross

ByBit is suspending services in the UK starting in early October as the UK implements new crypto marketing regulations.



“Bybit has made a choice to embrace the regulation proactively and pause our services in this market. The suspension will allow the company to focus its efforts and resources [on] being able to best meet the regulations outlined by the UK authorities in the future,” a blog post said.



UK customers will no longer be able to create new accounts on ByBit starting on Oct. 1. The company will cease new deposits and position buys on Oct. 8.&nbsp;



“UK Customers who are implicated by these measures are strongly encouraged to take action by Jan. 8, 2024,” the post <a href="https://announcements.bybit.com/en-US/article/announcement-bybit-to-suspend-services-in-the-uk-blt286daa9208c8f3aa/?category=latest_bybit_news&amp;channel=pr_&amp;medium=organic_social&amp;source=twitter&amp;sa_utm_ci=107&amp;pid=Social_twitter&amp;dtpid=16953838071898884&amp;campaign=enannouncement_16953838071898884&amp;utm_source=twitter&amp;utm_medium=organic_social&amp;c=enannouncement_16953838071898884&amp;sa_utm_channel=pr_&amp;sa_utm_tcn=16953838071898884&amp;is_retargeting=true">said</a>.&nbsp;



ByBit cited a June posting from the FCA outlining the new approach as part of its choice to suspend its services in the UK market.



The June FCA <a href="https://www.fca.org.uk/publications/policy-statements/ps23-6-financial-promotion-rules-cryptoassets">post</a> said that the regulation directly impacts consumers buying crypto, FCA-registered crypto companies, those attempting to register and overseas companies marketing to UK customers.&nbsp;



The announcement comes a day after the <a href="https://blockworks.co/news/uk-fca-warning-crypto-firms-unregistered-risk-warnings">UK gave crypto companies a “final warning.”</a>



In the Sept. 21 letter, the FCA cited “poor engagement from many unregistered, overseas crypto asset firms who have UK customers…” It stated that some had “refused to engage with the FCA”, despite the authority&#8217;s outreach attempts. Out of over 150 firms approached, only about 24 responded to a survey.



According to Lucy Castledine, the director of consumer investment, <a href="https://blockworks.co/news/uk-fca-deadline-crypto-marketing-regulation">the regulatory framework requires that crypto firms in the UK</a> present their offerings to UK customers “clearly, fairly and honestly. And they must provide risk warnings people understand.”



The regulations also require certain technical changes, such as the introduction of a cooling-off period. Firms registered within the UK have the option to request an extension of these deadlines until early January.



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ByBit to suspend UK market activity in early October

Sebastian Sinclair

The UK’s financial regulator has shut down dozens of crypto ATMs as part of its ongoing crackdown that includes an outright ban.



The Financial Conduct Authority (FCA) said in a statement it has ceased the operation of 26 machines after inspecting 34 locations.



In one instance, a Sheffield local paid thousands of pounds for crypto which never arrived, the FCA said.



&#8220;If you use a crypto ATM in the UK, you are using a machine that is operating illegally and you may be handing your money over to criminals,&#8221; said Steve Smart, joint executive director of enforcement and market oversight at the FCA, as reported by <a href="https://www.reuters.com/technology/uk-watchdog-shuts-more-illegal-cryptocurrency-machines-2023-07-10/?rpc=401&amp;" target="_blank" rel="noreferrer noopener">Reuters</a>.



In March last year, the regulator moved to <a href="https://blockworks.co/news/bitcoin-atms-illegal-in-the-uk-regulator-says" target="_blank" rel="noreferrer noopener">ban all crypto ATMs</a> across the UK, warning operators to “shut their machines down” or “face enforcement action.”



As a result of its prohibition, the number of bitcoin ATMs across the UK has fallen by more than 88% from 80 in March 2022 to just 10, <a href="https://coinatmradar.com/country/225/bitcoin-atm-united-kingdom/" target="_blank" rel="noreferrer noopener">Coin ATM Radar</a> shows.



The regulator has also called on crypto firms to abide by new advertising measures by October.&nbsp;



<a href="https://blockworks.co/news/crypto-uk-ads" target="_blank" rel="noreferrer noopener">Those rules</a> aim to govern how companies convey information regarding their crypto-related products across websites, applications and social media platforms, among other mediums.



Earlier this month, the UK took steps to <a href="https://blockworks.co/news/crypto-seizure-easier-uk" target="_blank" rel="noreferrer noopener">progress a bill</a> that seeks to simplify the process of confiscating digital assets for law enforcement and regulatory authorities.



If enacted, the law could empower officers to seize any hardware, software, physical items, or other objects that could aid in obtaining access to crypto.



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UK down to 10 crypto ATMs after financial watchdog’s latest cull

Shalini Nagarajan

The UK financial watchdog is calling on crypto firms to fall in line with the regulator’s new rules for ads by October.&nbsp;



The Financial Conduct Authority’s new rules target how companies communicate information about their crypto-related products on websites, apps, social media and online ads.



Even crypto businesses based elsewhere in the world with ads that reach UK-based individuals will have to comply with the rules, according to a July 4 <a href="https://www.fca.org.uk/publication/correspondence/letter-to-cryptoasset-firms-financial-promotions-regime.pdf" target="_blank" rel="noreferrer noopener">notice</a>.



Once the regime comes into effect on October 8, there will be four legal paths for crypto firms to market to UK consumers, including regulator authorization and exemptions.



Crypto firms marketing to UK consumers have been asked to figure out which paths they&#8217;ll take and how they&#8217;ll handle UK customers if they can&#8217;t promote to them.&nbsp;



The FCA has imposed a deadline of Aug. 4 for these businesses to respond with what steps they will take to prepare for the regime.



<h2 class="wp-block-heading">What if crypto ignores the UK rules?</h2>



The FCA has warned it will be tough with companies illegally promoting crypto to UK consumers.



Firms or individual promoters flouting these rules could end up with up to two years in jail, pay &#8220;unlimited&#8221; fines or both.&nbsp;



The regulator expects a key way towards compliance is to register under Money Laundering and Terrorist Financing Regulations.&nbsp;There is a fee to register and it could take up to three months to get approval.



Any firm hoping to be helped through the process will have to find themselves independent legal advice, rather than turning to the FCA for help.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true"><a href="https://twitter.com/hashtag/floki?src=hash&amp;ref_src=twsrc%5Etfw">#floki</a> on London bus 👀👀😂 <a href="https://t.co/YEdnuHyvJs">pic.twitter.com/YEdnuHyvJs</a>&mdash; Satoshi Zaramoto(10/10) (@Sweety_zaramoto) <a href="https://twitter.com/Sweety_zaramoto/status/1450137075664232450?ref_src=twsrc%5Etfw">October 18, 2021</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div><figcaption class="wp-element-caption">UK regulators last year <a href="https://www.theguardian.com/technology/2022/mar/02/watchdog-bans-floki-inu-cryptocurrency-campaign-on-london-tube-elon-musk" target="_blank" rel="noreferrer noopener">banned</a> a Lodon ad campaign for memecoin Floki Inu</figcaption></figure>



Last year, more than 50 cryptocurrency firms in the UK <a href="https://blockworks.co/news/uk-watchdog-clamps-down-on-crypto-firms-for-misleading-advertisements">found themselves recipients of enforcement notices</a>, which instructed them to review their advertising practices.&nbsp;



They were accused of engaging in misleading advertising targeted at consumers and acting in a socially irresponsible manner.



The UK Advertising Standard Authority ruled the companies could not incite a “fear of missing out” within potential investors regarding digital assets.



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Crypto has 3 months to clean up UK ads — or face jail and ‘unlimited’ fines

Ben Strack

The UK&#8217;s top finance regulator is currently in the process of finalizing rules concerning crypto marketing. This action is being taken because it says that there is a &#8220;growing mismatch&#8221; between consumers&#8217; investment decisions and their risk tolerance.



New regulations from the Financial Conduct Authority (FCA) require those promoting crypto assets to put in place clear risk warnings, ensure advertisements are not misleading and allow for investors to back out of potential investments within a set timeframe.



A policy statement published Wednesday said the latest rules “strikes the right balance between consumer protection and promoting potentially beneficial innovation.”



The regulator finalized rules last August to ensure firms marketing “high-risk investments” include better risk warnings, but noted at the time the regulations would not apply to crypto promotions.



Now, after considering feedback from <a href="https://blockworks.co/news/uk-crypto-regulation-in-the-works">a February proposal</a>, the FCA’s rules around crypto promotion are “near final,” according to the policy statement.&nbsp;



They are expected to take effect on Oct. 8 after a four-month transition period.



&#8220;It is up to people to decide whether they buy crypto, but research shows many regret making a hasty decision,” Sheldon Mills, the FCA’s executive director of consumers and competition, said in a statement. “Our rules give people the time and the right risk warnings to make an informed choice.&nbsp;&nbsp;



To legally promote crypto assets to consumers, people and businesses must be “authorized,” registered with the FCA or communicating in compliance with an exemption. Promotions not made using approved methods are punishable by up to 2 years in prison, fines, or both.&nbsp;



The new rules also require those marketing crypto assets to UK consumers to introduce a 24-hour “cooling-off period” for first-time investors with a firm.&nbsp;



This would prohibit a company or individual to send a consumer what the FCA calls a Direct Offer Financial Promotion (DOFP) unless that consumer reconfirms their request at least 24 hours later.&nbsp;



“This is intended to ensure that extra protections kick in before consumers are in a position — as a result of the DOFP — to take the crucial step towards placing their money in the investment,” the FCA’s policy statement notes.



​​Susannah Streeter, head of money and markets at financial services company Hargreaves Lansdown, labeled the cooling-off period one of the more significant requirements.&nbsp;



In particular, she noted, it helps novice users of exchanges who might get “cold feet” when it comes to crypto investments.&nbsp;



“This may help reduce the pile-on effect with some coins surging to eye-watering levels spurred on by frantic purchases driven by the [fear of missing out] effect,” Streeter added. “The FCA is clearly worried that far too many consumers are gambling away their money, desperate to catch a ride upwards, no matter how risky the journey is.”



<h2 class="wp-block-heading">More crypto holders to protect</h2>



The new rules come as the number of crypto holders in the UK more than doubled in a one-year span, according to FCA survey findings published Wednesday.&nbsp;&nbsp;



Conducted in August 2022, the survey gathered responses from more than 2,000 people in the country. UK adults holding crypto assets numbered roughly 5 million at the time, according to FCA findings — up from 2.3 million in 2021.



The most common reason for purchasing crypto assets — as reported by 40% of respondents — remains “as a gamble,” according to the FCA findings. Roughly 30% of those surveyed said they regretted purchasing cryptoassets.



In terms of crypto promotion, 36% of adults have digested crypto-related advertisements. Eighteen percent of crypto users reported being influenced to purchase such assets because of advertising.



The FCA regulations also follow the SEC’s crackdown on crypto exchanges in the US. The securities regulator <a href="https://blockworks.co/news/binance-changpeng-zhao-face-sec-charges">brought lawsuits against crypto exchanges Binance</a> and <a href="https://blockworks.co/news/sec-sues-coinbase-allegations">Coinbase</a> on Monday and Tuesday, respectively, for allegedly operating unauthorized exchanges and other securities violations —&nbsp;



The exchanges have denied wrongdoing.&nbsp;



Binance.US said in a tweet that the SEC filing is “unjustified by the facts, by the law, or by the Commission’s own precedent.” Coinbase Chief Legal Officer Paul Grewal said Tuesday that the SEC’s enforcement-only approach in the absence of clear crypto guidelines hurts companies like Coinbase “that have a demonstrated commitment to compliance.”



“It’s clear the FCA recognizes the damage that can be done to overall investor confidence when such high-risk investments are bought by people who seem woefully unaware of the risks,” Streeter said. “However, it knows it’s also walking a tricky tightrope.”&nbsp;



She added: “It recognizes these beefed-up safeguards are needed to ensure consumers are more protected from another FTX style implosion, but at the same time it doesn’t want to quash innovation in the digital coin and blockchain space.”



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UK Regulator’s New Crypto Rules Include ‘Cooling-off Period’ for Investors

<div id="highlights-block_63590bfc93163" class="highlights">
 <ul>
 <li>Under proposed measures, the Treasury would have the power to amend the definition of cryptoassets</li>
 <li>Final conclusion of the bill is set for Nov. 3</li>
 </ul>
 
</div>



UK lawmakers have voted in favor of a crypto-related amendment to the Financial Services and Markets Bill, but it could take a while until the proposed rules are enacted.



The House of Commons, the UK Parliament’s lower house, met on Tuesday for a reading of the bill, which tailors financial services regulation to UK markets post-Brexit.



The bill is intended to remodel the country’s regulatory framework, including setting out a range of measures that place the country in a more competitive financial position in the future.



The wide-ranging financial bill earlier sought to <a href="https://cms.blockworks.co/uk-to-regulate-stablecoins-as-a-form-of-payment-via-new-bill/" target="_blank" rel="noreferrer noopener">regulate stablecoins</a> as a form of payment. It now includes regulations around both stablecoins and cryptoassets, among a list of other proposed amendments by several lawmakers.



Parliament member Andrew Griffith proposed that the term cryptoasset be defined as “any cryptographically secured digital representation of value or contractual rights” that can be transferred, stored or traded electronically and uses blockchain technology.&nbsp;



New powers outlined in one clause state that “financial instruments, financial products and financial investments” may include cryptoassets. If the bill is enacted in its current form, the Treasury would have the power to amend this definition.



“This new clause amends the Financial Services and Markets Act 2000 to clarify that the powers relating to financial promotion and regulated activities can be relied on to regulate cryptoassets and activities relating to cryptoassets. Cryptoasset is also defined, with a power to amend the definition,” Griffith wrote in the <a href="https://publications.parliament.uk/pa/bills/cbill/58-03/0146/amend/finserv_day_pbc_1025.pdf" target="_blank" rel="noreferrer noopener">amendment paper</a>.



Griffith <a href="https://cms.blockworks.co/uk-proposes-bringing-crypto-under-regulatory-eye/" target="_blank" rel="noreferrer noopener">introduced</a> the amendment in parliament last week, signaling that the bill would bring crypto under its scope. That came after the UK’s Financial Conduct Authority in August <a href="https://www.fca.org.uk/news/press-releases/fca-clamps-down-marketing-high-risk-investments-consumers" target="_blank" rel="noreferrer noopener">finalized</a> stronger rules to ensure that firms marketing “high-risk investments” include better risk warnings.



Measures outlined in the bill would impact restrictions relating to the promotion of cryptoassets.&nbsp;



Alexander Tkachenko, CEO at asset tokenisation platform VNX, weighed in on the draft bill, suggesting that a variety of cryptoassets should be regulated differently.&nbsp;



<blockquote class="wp-block-quote">“Security tokens are actually regulated as financial instruments in the EU, for example,” he told Blockworks, referring to digitized versions of real-world investments such as stocks and bonds.</blockquote>



“However, utility tokens do not meet such criteria and shouldn’t fall under the category of financial instruments. If UK lawmakers follow this path, this would be in line with the EU approach to cryptoasset regulation and be positive for crypto industry development,&#8221; he said.



<h3 class="wp-block-heading">Bill introduced while Sunak was Chancellor of the Exchequer</h3>



Rishi Sunak, who recently <a href="https://cms.blockworks.co/incoming-uk-prime-minister-is-pro-crypto%EF%BF%BC/" target="_blank" rel="noreferrer noopener">bagged the top job</a> to lead the UK, helped formulate the landmark bill while he was still chancellor of the exchequer. Sunak is hailed as a “<a href="https://www.dtnext.in/business/2022/10/26/crypto-world-calls-sunak-a-champion-of-fintech-2" target="_blank" rel="noreferrer noopener">champion of fintech</a>” by the industry for wanting to make the UK a global hub for crypto technology and investment. 



“This is part of our plan to ensure the UK financial services industry is always at the forefront of technology and innovation,” he <a href="https://www.gov.uk/government/news/government-sets-out-plan-to-make-uk-a-global-cryptoasset-technology-hub" target="_blank" rel="noreferrer noopener">said</a> earlier this year about measures to adopt crypto regulation.



As part of his crypto-friendly proposals, he also proposed launching an official <a href="https://cms.blockworks.co/uk-treasury-asks-government-coin-issuer-to-mint-nft/" target="_blank" rel="noreferrer noopener">Royal Mint NFT collection</a> in April.



Sunak could help provide more clarity for crypto regulation in the UK if he follows through with his aims from earlier this year, according to Marcus Sotiriou, analyst at digital asset broker GlobalBlock.



“Liz Truss’ leadership led to political and economic instability, as the pound almost reached parity with the dollar shortly after she started her role as prime minister. It is believed that Rishi Sunak is significantly more competent when it comes to economic matters, hence potentially leading to less fear in UK markets in the short term,” Sotiriou said, adding that the new leader faces a tough few months ahead.



The bill will now proceed for a third reading, after which it will be sent to the Upper House of Parliament. A final conclusion is set for 5:00 pm UK time on Nov. 3. Recently-crowned King Charles III will be required to grant his Royal Assent for it to become law.



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UK Regulation of Crypto as Financial Product Edges Closer

Morgan Chittum

<div id="highlights-block_622b8988ee2b2" class="highlights">
 <ul>
 <li>There are 80 bitcoin ATMs or tellers in the UK, per data from Coin ATM Radar</li>
 <li>The FCA said “people should be prepared to lose all their money” if they invest in crypto assets because they are unregulated</li>
 </ul>
 
</div>



The Financial Conduct Authority (FCA) said on Friday that all crypto ATMs are prohibited from operating in the UK.



The regulator “warned” crypto ATM operators to “shut their machines down” or “face enforcement action,” according to a Friday <a href="https://www.fca.org.uk/news/news-stories/warning-illegal-crypto-atms-operating-uk" target="_blank" rel="noreferrer noopener">statement</a>.



<a href="https://coinatmradar.com/country/225/bitcoin-atm-united-kingdom/" target="_blank" rel="noreferrer noopener">Data from Coin ATM Radar</a> shows 80 bitcoin ATMs or tellers operate in the UK, none of which has been approved to offer crypto ATM services.



“We regularly warn consumers that crypto assets are unregulated and high-risk, which means people are very unlikely to have any protection if things go wrong, so people should be prepared to lose all their money if they choose to invest in them,” the FCA said in its announcement.



The news follows UK tax watchdog Her Majesty’s Revenue and Customs&#8217; confiscation <a href="https://cms.blockworks.co/uk-tax-watchdog-seizes-nfts-in-1-9m-fraud-investigation/" target="_blank" rel="noreferrer noopener">of three NFTs</a> last month in an almost $2 million fraud probe. 



Three people were arrested on suspicion of fraud as a result of the investigation. Suspects used virtual private networks (VPNs), stolen identities, fake addresses and unregistered phones to try to hide illegal activities.



This was the country&#8217;s first seizure of a blockchain-based digital collectible.



Nick Sharp, deputy director of economic crime at Her Majesty’s Revenue and Customs, <a href="https://www.bbc.com/news/business-60369879" target="_blank" rel="noreferrer noopener">told the BBC</a> that the authority is “constantly adapting to new technology to ensure [they] keep pace with how criminals and evaders look to conceal their assets.”



The use of bitcoin ATMs has come under increasing scrutiny elsewhere in the world as well. New licensing guidelines from the ​​Monetary Authority of Singapore (MAS) forced ATM operators there <a href="https://cms.blockworks.co/singapore-bitcoin-atms-shutting-down-following-central-banks-guidelines/" target="_blank" rel="noreferrer noopener">to shut down</a> in January.



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Bitcoin ATMs Illegal in the UK, Regulator Says

<div id="highlights-block_622108a13a7ee" class="highlights">
 <ul>
 <li>The Financial Conduct Authority added 172 firms to its list of unregistered crypto businesses during the six-month period</li>
 <li>More people checked the safety of cryptocurrency using the FCA’s ScamSmart Warning List tool than any other investment opportunity</li>
 </ul>
 
</div>



Reports of potential crypto scams shot up in the middle of 2021, according to the UK’s Financial Conduct Authority (FCA), as the regulator seeks to further crack down on actors causing investor harm.



The FCA had roughly 16,400 reports of possible scams between April and September of 2021, according to agency findings published Thursday — up from 12,400 over the same period the year prior.



<a href="https://www.investopedia.com/terms/b/boilerroom.asp" target="_blank" rel="noreferrer noopener">Boiler rooms</a> were the most commonly reported scam, where fraudsters cold-call investors offering them worthless, overpriced or even non-existent shares or bonds.



The three other most common reports were of cryptocurrency scams, FCA impersonation scams and recovery rooms — where fraudsters offer to help investors who were scammed or lost money on an investment get their money back for an upfront fee.



Overall, the FCA stopped 32 new firms, or 25%, from entering the consumer investments market between April and September.



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1024" height="683" src="https://blockworks-co.imgix.net/wp-content/uploads/2022/03/chart-1024x683.jpeg" alt="" class="wp-image-18181" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2022/03/chart-1024x683.jpeg?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2022/03/chart-1024x683.jpeg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2022/03/chart-1024x683.jpeg?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2022/03/chart-1024x683.jpeg?w=386 386w, https://blockworks-co.imgix.net/wp-content/uploads/2022/03/chart-1024x683.jpeg?w=392 392w, https://blockworks-co.imgix.net/wp-content/uploads/2022/03/chart-1024x683.jpeg?w=329 329w, https://blockworks-co.imgix.net/wp-content/uploads/2022/03/chart-1024x683.jpeg?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2022/03/chart-1024x683.jpeg?w=50 50w, https://blockworks-co.imgix.net/wp-content/uploads/2022/03/chart-1024x683.jpeg?w=1200 1200w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure>



Of the more than 16,000 scam inquiries, about 3,000 were related to cryptocurrencies — up 14% from the previous six months.



The FCA also offers a ScamSmart Warning List tool, which allows people to check the safety or risks of an investment opportunity. Cryptocurrency represents 34% of the checks, the most of any investment opportunity. The checks on crypto grew to 4,320&nbsp; — a 49% from the prior six months.



“The watchdog is swimming against an increasingly treacherous tide of scams and suspect investments,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.



<blockquote class="wp-block-quote">“Given the volatile rise of coins and tokens over the pandemic, it seems many more fraudulent operations have been launched, to take advantage of consumers’ fear of missing out on the crypto rollercoaster.”</blockquote>



The number of consumers in the UK holding cryptocurrency was estimated to be 2.3 million, according to <a href="https://www.fca.org.uk/publications/research/research-note-cryptoasset-consumer-research-2021" target="_blank" rel="noreferrer noopener">an FCA report</a> published in June.



The FCA’s cryptoasset team — responsible for supervising firms’ compliance with money laundering regulations — opened more than 300 cases relating to potential unregistered businesses in the space during the six-month period. The regulator noted that many of these businesses are likely involved in scams.&nbsp;



The FCA added 172 firms to its <a href="https://register.fca.org.uk/s/search?predefined=U" target="_blank" rel="noreferrer noopener">list of unregistered crypto businesses</a> during the period and made 10 referrals to the Advertising Standards Authority (ASA).



Crypto businesses that were already trying to register with the FCA have until March 31 to register with the regulator to continue trading. The regulator is also evaluating new applications separately.&nbsp;



The FCA is considering firms’ anti-money laundering and counterterrorist financing measures when assessing applications. Crypto market maker Wintermute announced in a Twitter post Monday that it is now registered with the FCA. But dozens of firms with temporary registrations — including <a href="https://www.revolut.com/system-status?sprediki2006/2006-19spred.htm/" target="_blank" rel="noreferrer noopener">Revolut</a>, a $33 billion neobank that includes crypto among its service offerings — are still awaiting a decision from the FCA.



“A significantly high number of businesses” are not meeting the required standards, according to <a href="https://www.fca.org.uk/news/press-releases/temporary-registration-regime-extended-cryptoasset-businesses" target="_blank" rel="noreferrer noopener">a March 2021 press release</a>, resulting in many businesses withdrawing their applications.



The latest data follows the UK government <a href="https://cms.blockworks.co/uk-government-seeks-to-boost-regulation-of-crypto-ads/" target="_blank" rel="noreferrer noopener">revealing plans in January</a> to strengthen its rules on crypto advertisements to protect consumers from misleading claims. The proposal called for bringing cryptoasset advertising under the rules of the FCA — the same standards that stocks, shares and insurance products are held to.



“It’s clear that education needs to be sharpened up pretty pronto with so many vulnerable consumers being lured in,” Streeter said. “It’s very welcome that crypto assets will soon fall under the FCA’s watch as part of new legislation.”



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