Sarah Pritchard, Executive Director of Markets for the UK's Financial Conduct Authority (FCA), gave an uplifting speech this week highlighting the FCA's openness to blockchain based innovation and cryptoassets and its policy efforts to address potential consumer harms.
Ms Pritchard's speech was delivered at City Week 2023, a forum organised in partnership with the UK Government, the City of London Corporation, UK Finance and leading City institutions. It brings together well-known names from the global financial services industry, the world of politics and the international regulatory community.
Ms Pritchard set the tone of her speech by beginning with an acknowledgement that crypto has become mainstream. She went on to emphasise the importance of regulation and the FCA's openness towards innovation:
Cryptoassets and blockchain offers opportunities for more efficient and innovative financial services and products. For example, they can make international cross-border payments faster and cheaper, which could support international trade or help our global workforce more easily send money to friends and family overseas. These are worth exploring.
Citing a Digital Asset Study by Fidelity Institutional Investor, Ms Pritchard said crypto take-up is on the rise year-on-year despite the recent crypto winter.
Mr Pritchard canvassed the FCA's regulatory efforts in relation to digital assets:
The FCA has approved 41 crypto firms of all sizes for registration under anti-money laundering and counter-terrorism legislation (nearly three quarters of applications were declined or withdrawn);
FCA will issue rules on financial promotions for crypto once the UK government enacts planned legislation. These regulations will apply to all firms marketing cryptoassets to UK consumers, regardless of whether the firm – or perhaps even celebrity influencer - is based overseas or what technology is used to make the promotion;
FCA has been working closely with the UK government on its proposals to regulate stablecoins that can be used for payments, and on its broader consultation on the regulation of cryptoassets generally. As part of this effort, FCA is working together with the Treasury and the Bank of England (the Cryptoasset Taskforce) to assess the potential impact of cryptoassets and distributed ledger technology and what the policy response should be; and
FCA has joined forces with global regulators and organisations to explore the regulation of cryptoassets. For example, as part of the digital asset working group within the IOSCO Fintech Task Force, FCA is leading on a key workstream on crypto and digital assets (while the US Securities and Exchange Commission is leading on DeFi products and services).
Finally, Ms Pritchard mentioned FCA's current Discussion Paper on updating asset management regulation in the UK:
which examines the potential regulatory changes for the tokenisation of funds, and the inclusion of tokenised assets or cryptoassets in fund portfolios.
In contrast to the United States' apparent clamp down on blockchain based innovation, Ms Pritchard's speech struck a balance between the need to protect consumers and a recognition that blockchain technology has entered the mainstream and offers significant benefits and opportunities. The speech is in keeping with the UK government's progressive plans to establish the UK as a crypto-asset technology hub. Indicating a sharp contrast with the SEC's approach in the United States, Ms Pritchard reiterated the FCA's willingness to work together with industry "to shape our rules and regulations to benefit markets, consumers and firms as crypto goes from niche to mainstream".