The Financial Conduct Authority has signalled a tough stance on crypto assets, ruling out access to regulatory bodies even after receiving advice.
In a speech delivered at City Week 2022 and published by the regulator today (April 26) chief executive Nikhil Rathi said the regulator was looking to finalise its approach to crypto regulation ahead of getting new powers over the promotion of risky assets such as crypto.
He said he wanted to "draw clear lines" around access to bodies such as the Financial Services Compensation Scheme which pays out on behalf of failed regulated firms.
He said: "The debate between legitimate investment and trading and unregulated entertainment and gambling has become blurred.
"Research shows that those investing in these products frequently do not understand the risks they run....
"We need to draw clear lines. We need clarity around ruling out future Financial Services Compensation Scheme coverage for investment losses from crypto, even when advised.
"As we have consistently warned, if you invest in crypto, you need to be prepared to lose all your money. "
Another area the FCA wants to crack down on is offshore service provision to UK customers.
"While have been encouraged to see partner agencies follow our lead when we have rejected firms’ registrations, it is not enough to rely on our global influence. This needs wider consideration by policymakers," he said.
It came as he said the FCA had been "overwhelmed" by the interest shown in its CryptoSrint event, which is due to take place on May 10/11.
CryptoSprint will explore industry views on future regulatory policy decisions around digital assets.
The FCA had invited applications from innovators, academics, regulators, technologists and other experts, as well as non-technical leaders from the financial services industry.
"In May, we will host our first ever CryptoSprint, having been overwhelmed by applications – more than 500 so far," Rathi said.
The government earlier this month confirmed it will look to adapt legislation to include the use of stablecoins as a legitimate form of payment and consult on wider regulation of the cryptoasset sector, with chancellor of the exchequer Rishi Sunak saying it was his ambition to make the UK a ‘global hub’ for cryptoasset technology.
Stablecoins are a form of cryptoasset that are normally pegged to a currency, and are intended to maintain a stable value.
Rathi said: "As the City Minister said in April, alongside encouraging innovation and having an open mind to new technologies, we need checks and measures that to protect our system and consumers from serious financial crime.
"In crypto, our remit is currently limited to ensuring anti-money laundering rules apply to crypto firms.
"So we welcome the government’s recent announcement of a flexible approach to regulation so we can proportionately deal with any risks that emerge and to receiving new powers over the promotion and marketing of high-risk assets, like crypto.
