UK FCA sees dramatic rise in crypto related probes

The primary financial regulator in the United Kingdom announced that there has been a 74% increase in the total number of crypto-related investigations at this point as compared to October 2018. The Financial Conduct Authority (FCA) explained that it has opened 87 different investigations into firms over the last 12 months, as compared to 50 investigations over the same period of time ending in October 2018, the Financial Times reported.

According to law enforcement officials, consumers have lost a minimum of £27 million (US$33.15 million) in scams involving such cryptocurrencies as bitcoin. In addition, it is reported that as many as 1,800 different crypto or foreign-exchange scams have been reported to law enforcement officials in the last 12 months, nearly triple the amount from last year.

This kind of activity is causing many to want to see greater regulation of the industry, but Jacqui Hatfield, Head of U.K. Financial Regulation at law firm Orrick, would like people to take a deep breath before making any types of decisions. ‘This is better than a knee jerk reaction of ‘we don’t want to regulate crypto asset businesses.’”

In addition, while these numbers are staggering, it also points to the fact that the FCA is taking a proactive stance to get involved in investigating these kinds of crimes. As attorney David Heffron explains, “It reflects the FCA’s increasingly hands-on and no-nonsense approach to enforcing the law in the cryptocurrency market. For cryptocurrency businesses acting lawfully, these statistics will be encouraging — they want bad actors pushed out.”

This is good news for the industry, and it is showing in the results. While there have been losses of over $34 million in 2018 and 2019, the amount these scams have caused individuals has dropped significantly during this time. The average individual losses dropped from $76,000 all the way down to $18,500, a decrease of over 75%.

In July, the FCA proposed a complete ban on the selling of crypto derivatives to retail investors. A consultation period ended on October 3, and it is expected that a complete ban on these derivatives will be instituted in the early part of next year. As one insider put it, “It would take an earthquake for the FCA not to press ahead” with this idea.

Crypto derivatives include such things as options, futures, and swaps. They have become popular with investors, as there were nearly 23 billion trades last year involving these derivatives. Should the U.K. opt to impose this ban, they would join Japan in creating a blanket ban.

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