The UK’s Financial Conduct Authority (FCA) has opened up investigations into 24 businesses within the cryptocurrency space. The news comes after the US Securities and Exchange Commission (SEC) earlier this month confirmed that it is targeting fraudulent initial coin offerings (ICOs).
In a response to a Freedom of Information request (FOI), the FCA stated that it was making inquiries into 24 businesses that are involved in some way with cryptocurrencies. The investigations are to find out if the companies are performing any activities that fall under the jurisdiction of the FCA but have not been registered. This may relate to ICO activity.
The FCA also said that seven whistleblower reports have been opened in relation to cryptocurrency businesses so far in 2018. The watchdog stated in the response that it may take action if it believes there is a potential risk to consumers.
The FCA took the opportunity to further explain its position on cryptocurrencies, deeming them a financial instrument but not a currency. In this respect, they are not regulated by the FCA but any business involved in an ICO is required to register.
In April, the FCA said, in a statement: “It is likely that dealing in, arranging transactions in, advising on or providing other services that amount to regulated activities in relation to derivatives that reference either cryptocurrencies or tokens issued through an initial coin offering (ICO), will require authorisation by the FCA.”
In November 2017, the FCA also warned about cryptocurrency Contracts For Differences (CFDs), which are a type of derivative trading. The watchdog said that due to the volatility of the cryptocurrency market, this type of trading is very high-risk.
In the US, the SEC has maintained its stance that all ICOs are securities but instead of cracking down on them, it has focused solely on fraudulent cases. It charged the two founders of cryptocurrency Centra, who raised USD 32 million, with carrying out a fraudulent ICO. The news went viral as it emerged Floyd Mayweather had promoted it on his own social networks.
image: Steven Pisano. CC BY 2.0