Navigating the Crypto Landscape: The FCA’s Balanced Approach
As the cryptocurrency market continues to evolve, financial authorities in the United Kingdom are striving to find the right balance between traditional finance (TradFi) and decentralized finance (DeFi) when it comes to regulating cryptocurrencies like {BTC}.
According to Matthew Long, the director of payments and digital assets at the Financial Conduct Authority (FCA), the key is to combine the best elements of both worlds. “What we’re trying to do is take the best of traditional finance and understand the nuance of the system that we’ve got,” Long stated at the FT Crypto and Digital Assets Summit.
The FCA’s approach aims to achieve the same level of risk and regulation as in traditional finance, without reinventing the wheel. Long acknowledged that the process has not been entirely straightforward, as the FCA has encountered both expected and unexpected challenges along the way.
FCA director of payments and digital assets, Matthew Long (left), and Digital Asset co-founder Yuval Rooz. Source: FT Live
“The simplest and most straightforward answer is that they [FCA] are trying to take the best of traditional finance, so it’s the same risk, same regulation and not reinvent the wheel,” the FCA director of digital assets explained.
The FCA’s efforts extend beyond just regulating the crypto market. The authority has also been actively working on increasing its capabilities in detecting and combating crypto market abuse, as well as preventing the industry from placing illegal crypto ads.
FT Crypto and Digital Assets Summit’s panel on regulating crypto and digital assets. Source: Cointelegraph
Moreover, the FCA recognizes the potential harm in both centralized finance (CeFi) and DeFi, and is exploring opportunities to keep good actors in the crypto industry while making it “cleaner, safer and better.”
In recent years, the U.K. has emerged as a significant player in the crypto economy, attracting considerable attention from the FCA. As of August 2023, the FCA reported that the authority had approved the registrations of 38 crypto firms since 2020, out of a total of 300 applications.
This balanced approach to crypto regulation, which draws from the strengths of both traditional and decentralized finance, aims to foster a thriving and responsible crypto ecosystem in the U.K.