UK watchdog issues warning about 111 unregistered crypto asset firms

Britain’s markets watchdog said on Tuesday that more than 100 unregistered crypto asset firms posed a risk to the broader financial system and warned consumers, banks and payment services companies against dealing with them.

Mark Steward, the Financial Conduct Authority’s (FCA) head of enforcement and market oversight, told City & Financial’s City Week event that such companies were high risk, volatile and unregulated – and 111 were operating in Britain without necessary registration.

“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,” he said. “This is a very real risk so we are worried about that.”

Since January, when the FCA was appointed anti-money laundering and counter terrorist financing supervisor of crypto asset firms, such businesses have had to obtain full FCA registration before they can begin trading.

But only a handful have – posing a financial crime risk, Steward said.

Almost 2.5 million British adults now hold crypto assets, a sharp rise over the last year as people – locked indoors by the COVID-19 pandemic – spend more time online and are driven by the fear of missing out on a boom.

Steward said many new investors – who tended to be male, over 35 years old, funded by credit and less knowledgeable than 18 months ago – ran the risk of falling prey to tulip mania, the infamous 17th Century Dutch bulb trading frenzy.

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