July 20, 2020 / 5:48 PM / 24 days ago

Britain to beef up City watchdog powers over crypto-assets

FILE PHOTO: Representations of virtual currency Bitcoin are seen in this picture illustration taken taken March 13, 2020. REUTERS/Dado Ruvic/Illustration/File Photo

LONDON (Reuters) - Britain’s finance ministry on Monday proposed giving the City’s watchdog new powers to regulate crypto assets like bitcoin, and also outlined a crackdown on misleading sales literature bombarding consumers over the internet.

Currently any firm authorised by the Financial Conduct Authority (FCA) can approve any financial promotion from an unauthorised firm, but the system is not working properly, the ministry said.

The ministry is proposing a “regulatory gateway” to pre-vet an authorised firm that wants to give the nod to marketing material from an unauthorised financial services firm.

“Any firm wishing to approve the financial promotions of unauthorised firms would first need to obtain the consent of the FCA,” the ministry said in a statement.

Britain also proposes to extend the FCA’s “perimeter” to bring the promotion of some types of crypto-assets under its wing for the first time.

“It is the government’s assessment that many of these unregulated cryptoassets expose consumers to unacceptable levels of risk,” the finance ministry’s consultation paper said.

“The cryptoasset proposals are not surprising and deal another nail in to the coffin of illegitimate ICOs (initial coin offerings), which have lost their shine since the heydays of 2018,” said Bradley Rice, senior associate at law firm Ashurst.

Huge amounts of consumer money now flow into cryptocurrencies, often advertised on social media and almost entirely out of the reach of the FCA, said Matt Hopkins, head of fintech at accountants BDO.

“Regulation will make it much more difficult for crypto businesses to access investors who may not understand the risks they are taking,” Hopkins said.

Reporting by Huw Jones; Editing by Catherine Evans

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