INCREASING numbers of cryptocurrency businesses are facing regulatory investigations.
Law firm Pinsent Masons is warning that the number of live Financial Conduct Authority (FCA) investigations into cryptocurrency businesses has increased by 74 per cent to 87 as of September 2019, up from just 50 in October 2018.
David Heffron, partner at Pinsent Masons, said the huge fortunes that have already been made by early investors in cryptocurrencies makes private clients more susceptible fraudsters.
It also easy for a fraudster to set up a cryptocurrency business and sell tokens as they require almost no physical assets, he warned.
The FCA estimates that individuals in the UK lost more than £27m, that it knows of, to cryptocurrency and forex investment scams in 2018/19.
“The rise in investigations reflects the FCA’s increasingly hand on and no-nonsense approach to enforcing the law in the cryptocurrency market,” Heffron said.
“For cryptocurrency businesses acting lawfully these statistics will be encouraging – they want bad actors pushed out.
“The FCA’s crackdown on businesses operating on its regulatory perimeter will instil a degree of confidence that products reaching consumers are less likely to be scams.”
Whilst it is increasing its investigations into potentially fraudulent crypto businesses the FCA is also increasing its cooperation with legitimate cryptocurrency businesses to assess whether their products require authorisation.
Since the launch of the FCA’s regulatory sandbox, 52 of the 135 businesses accepted have been cryptocurrency and blockchain-related firms, Pinsent Masons said.
“For those cryptocurrency businesses looking to launch any product, engagement with the FCA is now an absolute necessity,” Heffron added.
“If any business is unsure as to whether they require authorisation, then they should speak to a professional.”
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