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UK regulator is ‘chasing crypto sector offshore’, says think tank director

UK crypto law
Image credit: London Tech Week

The UK’s financial regulator is “basically chasing the crypto sector offshore” with its hard-line approach, risking a repeat of the 2008 financial crash conditions when consumers turned to overseas banks that were not being regulated in the UK, according to the director of the Digital Economy Initiative.

Ijeoma Okoli, director of the cryptocurrency think tank, said that despite a lot of positive noise around cryptoassets in the UK, there were not enough clear signs of progress.

It comes a week after the Financial Conduct Authority (FCA) announced a consumer protection overhaul that will introduce a “cooling-off period” for first-time crypto investors and a ban on referral marketing.

“If you wind back the clock a year or so ago, you’d find that a large segment of the crypto population was complaining about the FCA,” Okoli said during a panel at London Tech Week 2023. “Nothing has changed at the FCA right now.”

“[The FCA is] not approving companies to establish themselves in the UK…that was negative because it wasn’t encouraging the sector in the UK, but it was also negative from an investor protection view.”

She said that because of the way UK crypto law is currently written, consumers in the UK are accessing crypto services via companies operating outside of the region.

The risk there is that if crypto services are not being properly regulated in the UK, and if those outside the country are not being regulated in their own jurisdiction, “there’s a gap”, Okoli said.

“Think back to 2008 where a lot of UK consumers lost money because [foreign] banks weren’t being regulated in the UK, the same thing could possibly happen now, until there’s a change of law.”

A spokesperson from the FCA told UKTN: “Competitiveness thrives when strong standards are in place that protect people and markets while encouraging innovation. The crypto industry is no exception.

“Internationally there is an acknowledgement that crypto markets are cross-border in nature and the risks are not confined to one jurisdiction. Our approach to the new rules for promoting crypto recognises this and is consistent with the International Organization of Securities Commissions’ global recommendations for regulating cryptoassets.”

UK MPs have called for meaningful cryptoasset law reform by 2025, dedicated cryptocurrency units and a “crypto tsar” to ensure the UK can be an early leader in the sector.

The UKTN team will be reporting from London Tech Week throughout the event. Subscribe to the daily newsletter to stay up to date.