The Financial Conduct Authority (FCA) enforcement action against the UK-based arm of crypto exchange Coinbase was cited to be a “one-off,” according to legal expert Charlotte Tregunna.
The enforcement action stirred cryptocurrency investors, fearing a potential UK regulatory crackdown akin to that of the US SEC after the Coinbase subsidiary CB Payments Limited (CBPL) was fined.
Concerns arose after CBPL received a $4.5 million fine on July 25 for breaching a voluntary user agreement with the FCA to prevent it from onboarding “high-risk” customers.
We’ve fined CB Payments Ltd £3,503,546 for repeatedly breaching a requirement that prevented the firm from offering services to high-risk customers. #cryptoassets #CryptoTrading #FinancialRegulation https://t.co/etahpXO3q3
— Financial Conduct Authority (@TheFCA) July 25, 2024
This fine is particularly concerning as it marks the first instance of FCA enforcement based on the Electronic Money Regulations 2011 Act.
While some investors worry this could signal more scrutiny for other cryptocurrency exchanges in the UK, legal experts dismiss the possibility of a crypto industry crackdown.
The FCA Coinbase Fine was a ‘One-Off’
The case between the FCA and CBPL suggests a “one-off” enforcement action rather than a tougher stance against the crypto space, according to Charlotte Tregunna, partner at business crime law firm Peters & Peters.
Tregunna cited the fines as a “last resort,” noting that CBPL had over three years to address issues with Coinbase’s systems and controls. She added:
“It’s an obvious breach and the FCA can’t really ignore it if they were given adequate time to resolve it.”
The legal expert also called the FCA’s involvement a “rare occurrence,” noting that firms usually resolve such situations, especially when it’s a voluntary requirement. Thus, these cases rarely reach this level of enforcement.
According to the UK regulator, the FCA’s investigation focused on the firm’s e-money transmission services rather than its crypto-asset transactions.
UK Remains Firm in its Goal to Become a Crypto Hub
Despite the recent fine, the FCA is aiming to become a crypto-friendly regulator that doesn’t stifle innovation, according to Tregunna:
“The FCA ultimately wants to be seen to be crypto and e-money-friendly, within reason. It will provide opportunities for those providers and issuers to improve their standards and compliance frameworks.”
This signals the UK’s renewed efforts to foster a welcoming environment for cryptocurrency, committing to its plans to become a crypto hub.
In 2022, then-Prime Minister Rishi Sunak announced the vision for UK Crypto in the global financial market, aiming to make the UK a “global hub for crypto assets technology.”
The UK has been working towards this goal. In June 2023, the UK parliament voted to recognize Crypto as a financial instrument, allowing regulation by the Financial Conduct Authority (FCA).
However, it is uncertain if these plans will advance under Labour following their election last month, as no official plans have been laid out so far.
Cryptocurrency regulation has become a global talking point in elections, particularly in the US, with Donald Trump’s plans to combat the Biden Administration’s “hostile” stance on crypto.
Credit: Source link