UK FCA crypto skills gap is causing slow enforcement, says National Audit Office

 

Concerns have been expressed by the National Audit Office (NAO) in the UK regarding the Financial Conduct Authority's (FCA) ability to effectively regulate the cryptocurrency market.

The NAO asserted in a recent report titled "Financial services regulation: adapting to change" that the FCA is acting slowly to address and stop illegal activity in the cryptocurrency sector.

High staff turnover rates and a lack of specialist skills increase risk to @TheFCA's key commitments.

It has responded by recruiting and spending £317m on its change programme.

This should help it prepare financial services for the future.

More: https://t.co/U66ep8J8Sp pic.twitter.com/GtG5TAjl4t

— National Audit Office (@NAOorguk) December 8, 2023

 The FCA delayed nearly three years to take action against unlicensed operators of cryptocurrency ATMs, as the NAO pointed out. As part of a coordinated investigation, the FCA shut down 26 cryptocurrency ATMs, according to a story published on Cointelegraph on July 11. Meanwhile, according to the NAO:

“While the FCA has required crypto-asset firms to comply with anti-money laundering regulations since January 2020, and began supervision work including engaging with unregistered firms, it did not begin taking enforcement action against illegal operators of crypto ATMs until February 2023.”

The NAO asserts that the lack of specialized crypto people is to blame for the delay in registering crypto enterprises to request regulatory approval from the FCA.

According to the research, "for instance, the FCA took longer than expected to register crypto-asset firms under money laundering regulations due to a shortage of crypto skills."

As of January 27, Cointelegraph revealed that, since the regulations went into effect in January 2020, the FCA has only authorized 41 of the 300 applications submitted by cryptocurrency firms seeking regulatory permission. 

This follows the FCA's recent publication of guidance materials aimed at assisting cryptocurrency enterprises in comprehending the recently implemented new regulations regarding crypto marketing.

The FCA published "finalized non-handbook guidance" for compliance with the new regulations, according to a Cointelegraph story from November 2.

The new regulations particularly address client promotion policies for cryptocurrency companies. The FCA listed problems such risk warnings not being accessible enough in small fonts and cryptocurrency companies touting how easy it is to use cryptocurrency without emphasizing the risks.