FCA Launch New Investigation on Crypto Startups

New reports have emerged that the Financial Conduct Authority (FCA) would be tightening the leash in their continued efforts of regulating crypto derivatives. 

The British regulatory and supervisory body has been relentlessly campaigning for a ban on bitcoin derivatives for quite some time with the primary aim of protecting the consumers.

FCA Determined to Scrutinize Crypto Startups

In May 2019, the FCA warned the people against the increasing tread in scams in online platforms, fooling investors into investing in forex and crypto scams. 

According to the report, scams on online platforms have increased three-fold with about 1800 cases resulting in a loss of approximately $33.2 million in just a year.

FCA believes that tough approaches will lead to a positive outcome, such as a reduction in the number of losses in the crypto space. 

David Heffron, one of the partners at the international law firm – Pinsent Masons, stated that if cryptocurrency startups operated within the bar lines of the law, it would push the bad actors out of business and the legit platforms would prevail. 

Currently, there are 87 crypto firms in the crypto space which are under the microscope of the FCA. This is number has spiked when compared to last year’s, 50. 

Lack of Awareness Cause for High Losses in the Crypto-space

According to the report, People who were new to cryptocurrency were more prone to these scams, which were attributed to their ignorance and resulted in an approximate loss of $492 million in crypto derivatives in the period between 2017 and the end of 2018. 

Apart from ignorance, leverage and high trading costs are the other factors that have contributed to the heavy losses in these online platforms. The FCA believes that these losses can be reduced to 234 million Euros per year if people observed the law.

Contrary, Danny Masters of CoinShares stated that a ban is not the way to go as it would push users to unregulated platforms, hence, further exposing them to higher risks of scams. He also stated that it is not up to the FCA to decide what happens to a new technology such as blockchain technology. However, the FCA believes that it is their responsibility to safeguard the customers.