UK watchdog warns against over 100 unregistered digital currency firms

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The U.K. financial watchdog has issued a warning against more than 100 digital currency companies that it says have been operating in the country without the required licensing. According to the Financial Conduct Authority (FCA), these firms are high risk and volatile and have been a source of concern for the regulator. The warning comes as the watchdog revealed that over 2.5 million U.K. residents now own digital currencies.

The FCA has continued to take a keen interest in digital currencies over the past few years, even as its role in overseeing the asset class has continued to grow. In January, it issued a stern warning that all unregistered firms must shut down and refund investors.

However, it has allowed companies that are yet to be approved to serve U.K. residents to continue operating as long as they have applied for registration. As CoinGeek reported, the FCA extended this grace period, known as the Temporary Registration Regime (TRR), till March 2022.

Now, the regulator has warned against 111 firms it claims have been operating illegally in the country. Speaking at the “City & Financial’s City Week” event, the regulator’s head of enforcement Mark Steward warned that these companies are high risk and volatile.

He told the attendees, “We have a number of firms that are clearly doing business in the UK without being registered with us and they are dealing with someone: banks, payment services firm, consumers. This is a very real risk so we are worried about that.”

Since the FCA became the anti-money laundering and counter-terrorism supervisor for digital currency firms, only a handful have applied and obtained the full FCA registration, Steward said.

The warning comes barely a week since the watchdog revealed that the number of U.K. residents holding digital currencies has shot up to 2.3 million people, up from 1.9 million in 2020. The median holding had risen from £260 to £300. However, while ownership was shooting up, overall understanding of digital currencies had declined. As the Financial Times revealed, of the 2.3 million digital currency holders, 30% couldn’t pick out the correct definition of a digital currency from multiple choices.

This lack of understanding of digital currencies will prove costly, Steward believes. He compared the current hype around digital currencies to the infamous Tulip Mania in the 17th century.

He remarked, “The reason many are investing now is because they have a fear of missing out on what might be a boom. Leaving aside how volatile these instruments actually are, it has tulip mania written all over it.”

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