Crypto regulatory failures: FCA's slow enforcement and staffing issues draw criticism

The UK's Financial Conduct Authority (FCA) is facing criticism from the country's National Audit Office (NAO) for its slow approach to enforcing cryptocurrency laws and the lack of staff with expertise in cryptocurrency.

A recent report released by the NAO, an independent entity responsible for reviewing public spending, highlighted the potential impact of cryptoassets as an area of uncertainty that could hinder the FCA's regulatory effectiveness.

Although the FCA mandated digital asset companies to comply with anti-money laundering regulations in January 2020 and began working with unregistered companies, it was not until February 2023 that enforcement action was taken against illegal operators of crypto ATM. The report raises concerns about the FCA's capabilities while effectively addressing risks within the crypto industry.

New hire and focus on cryptocurrency expertise

The FCA has reportedly been making significant changes to its data management practices to identify risks more effectively. However, the report notes that these efforts are expected to take several years, and identified data risks are not expected to be mitigated until 2025.

In addition, turnover, including at the top, has been an ongoing issue for the FCA in recent years. Despite the decrease in turnover, the specialist sector is still at risk of delivery due to higher turnover. The report further states:

In recent years, FCA has experienced a high rate of employee turnover, including at the top level. Although FCA's overall turnover has now declined, delivery risks remain high in certain specialist areas.

To address this, FCA has recruited and trained more than 2,000 new employees, including seven of the 11 senior officials who have joined since September 2020. The FCA recognises the importance of maintaining professional skills and expertise due to the lack of cryptocurrency-savvy employees who delay the registration of cryptoasset companies under money laundering regulations.

Crack down on illegal cryptocurrency activities

In addition, the FCA is actively strengthening its international engagement to strategically manage its influence on global development.

Recognising the importance of international collaboration, the FCA has established a new International Steering Committee to provide cross-organisational oversight and support. The report notes that the FCA works with other organizations to address common issues across a variety of industries, including the digital economy and financial services.

Ultimately, the FCA was reportedly responsible for more than 1,400 cases of illegal digital asset activity between January 2020 and June 2023. Between 2020 and the first half of 2022, it also received over 13,350 reports of scams while regulating 50,000 companies across the UK.

According to CoinGecko, the global cryptocurrency market continues its remarkable growth trajectory and currently has a market capitalization of a staggering $1.59 trillion.

This represents a 3% change in the last 24 hours, an impressive 90.23% change compared to the market cap recorded a year ago.

Image: Shutterstock, Graph: TradingView.com