Regulation
Help us tackle £24bn money laundering problem, FCA tells crypto firms – DL News
- FCA director says digital asset firms should be involved in cleaning up markets.
- The FCA is fighting claims that it is stifling technological innovation in the UK.
Using technology to fight money laundering. This is the message from Matthew Long of the Financial Conduct Authority.
“I still see £24 billion of money laundering in crypto transactions, and that’s a low estimate,” Long, who is the director of payments and digital assets at the UK markets watchdog, said on Wednesday, at a conference in London.
Long said he is eager to see crypto companies “use innovation to do that.”
“First of all, let’s create a clean market, then we talk about things like using stablecoins for payments,” he said.
He was responding to a question about how the FCA can strike a balance between encouraging innovation and creating rules that protect investors and ensure safer markets.
This could be interpreted as a pointed question to ask the FCA.
Conservative politicians, keen to position themselves as a pro-business party ahead of this year’s general election, have argued that heavy regulation from the FCA is preventing crypto firms from thriving in the UK.
Treasury Economic Secretary Bim Afolami said last week that the regulator risks “undermining” the entrepreneurial spirit that drives crypto ventures.
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FCA Approved Only Four Cryptocurrency Registrants in 2023, AS DL News reportedciting the would-be registrants’ poor anti-money laundering provisions.
The watchdog has also cracked down on crypto ATMs, and its marketing regime has forced participants, including Binance and PayPal, to suspend operations in the country.
State-of-the-art regulator
The FCA, however, did he had been insisting for years that it is a regulator at the cutting edge of technology, pointing to initiatives such as its regulatory sandbox – where fintechs can test ideas for products and services – as proof.
Long also cited the FCA’s new Digital Securities Sandbox, or DSS, which allows institutional market participants to experiment with the tokenization of financial securities such as stocks and bonds.
The FCA launched the sandbox in January in collaboration with the Bank of England and in April it launched a consultation aimed at improving its functioning.
Long said the DSS is an example of how the regulator is evolving its focus beyond retail consumer protection to institutional markets.
“We’ve moved from a retail position to a wholesale position, then from money laundering and financial promotions regulations we move to the next phase: working pretty hard on stablecoins as we go forward,” he said.
The UK government consulted on the regulation of cryptocurrencies last year. With a phased approach to implementing these rules, the FCA is now working on stablecoin legislation.
Afolami said these rules will be ready by mid-year.
“For me it’s relatively simple [to use] innovation to mitigate the risks that we continue to talk about, getting to a position where we feel comfortable with the market that we have and using tools like the Digital Securities Sandbox” to work with market participants, Long said.
Joanna Wright is a regulatory correspondent for DL News. Contact her at joanna@dlnews.com.