UK financial watchdog takes contradictive line on crypto to UK government

In a speech given on Friday by Charles Randell, chairman of the UK Financial Conduct Authority (FCA), the “speculative” nature of cryptocurrencies was mentioned, and also their legitimacy was brought into question. This is out of step with the UK’s proposed international crypto hub.

It was with some surprise that the Chancellor of the Exchequer Rishi Sunak announced plans to make the UK a global hub for cryptocurrencies. 

The UK establishment has generally gone along with the line put out by central banks across the world that crypto is not to be trusted and should be highly regulated. So for this news to come out of such a financially conservative country was pretty staggering.

However, the establishment within the UK could be said to be extremely sceptical to say the least. The deputy governor of the Bank of England, Sir Jon Cunliffe, has warned how cryptocurrencies could destabilise financial markets.

The chairman of the UK financial watchdog, Charles Randell, has made his opinions known for some time now, and last Friday he spoke in a very negative vein on the subject of cryptocurrencies.

Randell spoke of the lack of “underlying value” for cryptocurrencies, and said that people should not be encouraged to invest in such assets. He stated:

“When the price of Bitcoin can readily halve within six months, as it has done recently, and some other speculative crypto tokens have gone to zero… should people without any significant savings or financial experience be encouraged or permitted to buy speculative crypto at all?”

Randell also said that he was very worried about how the watchdog was going to cope with the amount of regulation that would be needed for the crypto sector and the “significant costs” that this would entail.

Opinion

Given the large number of probably very inexperienced investors who have already entered the crypto trading space, Charles Randell is right to be concerned as to the potential for heavy losses they are likely to suffer.

However, it might be wondered why they are there in the first place. Surely an only partly regulated financial arena such as the crypto sector is a dangerous playground for the uninitiated. There is also no lack of warnings from agencies and institutions such as from watchdogs and the banks.

The reason the average retail investor is in the crypto space is that they are shut out of any meaningful investments in traditional finance, unless they are ‘accredited investors’ with a lot of wealth to their name. Also, the yield they can get from banks and other traditional financial companies is frankly derisory.

With the economy in such a parlous state many investors are increasingly looking for alternative investments. For the likes of Charles Randell to say that investors should not be “permitted” to buy cryptocurrencies is typical of a nanny state.

If we could trust government watchdogs to regulate crypto fairly, with the interests of the average retail investor at heart, then we would all applaud them for doing so.

But to just seek to bar all the small-time retail investors from the most innovative technologies that have arguably ever appeared in finance, is overreaching and despotic.

The UK needs to make its mind up on where it stands exactly in relation to cryptocurrencies. Just muddling along as it generally tends to do really isn’t good enough. If enough clarity of vision can only be made, and the leaders can emerge to follow it through, then hopefully there will be gain to be made for the government, as well as for the average investor.

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.