Key Points
- UK’s Financial Conduct Authority (FCA) aims to blend traditional finance and decentralized finance in regulating cryptocurrencies.
- The FCA is exploring ways to maintain good players in the crypto industry and make it safer and cleaner.
The UK’s financial regulatory body, the Financial Conduct Authority (FCA), aims to find a balance between traditional finance (TradFi) and decentralized finance (DeFi) when regulating digital currencies such as Bitcoin (BTC).
The crypto community and regulators have been debating the optimal approach to crypto regulation, with fears of either over-regulating or under-regulating the market.
Merging Different Approaches
Matthew Long, FCA’s director of payments and digital assets, suggests that the appropriate way to regulate the sector is to merge various strategies and determine the most effective one. He stated that the FCA is attempting to extract the best elements of traditional finance while comprehending the nuances of the current system.
Long noted that the FCA is striving to apply the same risk and regulation standards as in traditional finance, without reinventing the wheel. However, he emphasized that the authority must adapt to the differences in cross-border globalization.
Addressing Challenges in Crypto Regulation
Long also acknowledged that the FCA has encountered many unexpected challenges in crypto regulation. Some issues that initially seemed straightforward turned out to be complex, while others that were anticipated to be problematic ended up working well.
During the discussion, Long highlighted the existence of risks in both centralized finance (CeFi) and DeFi. He noted that many global authorities already have measures in place to combat money laundering in CeFi. The FCA is currently investigating ways to retain positive contributors in the crypto industry while making it safer, cleaner, and more reliable.
The UK has emerged as a significant player in the crypto economy in recent years, drawing considerable attention from the FCA. As of August 2023, the FCA had approved the registrations of 38 crypto firms out of 300 applications since 2020. The authority is also intensifying its efforts to detect and combat crypto market abuse and prevent the industry from publishing illegal crypto advertisements.
