Lack of crypto skills caused delays in FCA regulation, says watchdog

NAO crypto Image credit: MVelishchuk / Shutterstock

Limited specialist knowledge from financial regulators has caused delays in tackling crypto-related crime, according to a report from public spending watchdog the National Audit Office (NAO).

In its latest report covering changes to financial services regulation, the NAO said that while the Financial Conduct Authority (FCA) has required cryptoasset firms to comply with anti-money laundering regulations since 2020, its efforts to register crypto firms and tackle criminal activities such as crypto ATMs were delayed.

The NAO pointed out that the FCA did not begin enforcing action against crypto ATMs – illegal kiosks where people can purchase cryptocurrencies – until February 2023.

The FCA started working with UK law enforcement this year to conduct raids on suspected sites hosting illegal crypto ATMs. Investigations have taken place in London, Leeds, Exeter, Sheffield and Nottingham.

The NAO report said “a shortage of crypto skills” at the regulator meant it “took longer than planned” to properly regulate crypto activity.

The FCA said it has dealt with more than 1,400 cases relating to unauthorised cryptoasset activity. The NAO’s report said in 2020, more than 3,150 cryptoasset scams were reported, a figure that more than doubled in 2021.

“The FCA is undergoing significant reform, responding to changes in the financial services regulatory framework and making operational changes intended to improve performance,” said NAO head Gareth Davies.

“The FCA must complete its work on optimising its use of data, assessing whether it is achieving the outcomes it intends and whether it is able to direct resources to where they can have most impact.”

Davies added that the FCA must be “clear about which of the long list of activities it is monitoring internally are its priorities”.

The FCA did not immediately respond to a UKTN request for comment.