Investors Should Not Receive Compensation for Crypto Losses, Says FCA CEO

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Nikhil Rathi – CEO of the UK’s main financial regulator FCA – has proposed that the UK government not compensate people investing in cryptocurrencies for a loss.

Digital assets have been used in criminal activity, and the investors who deal with them “must be prepared to lose all of their money,” the top executive said.

UK must “draw fairly clear lines”

FCA Managing Director – Nikhil Rathi – addressed his proposal to the Treasury Committee when asked about his views on the UK cryptocurrency industry. He said bitcoin and altcoins have been a “vector of serious organized crime” and money laundering, and investors should be aware of these risks before entering the market.

As such, the Financial Services Compensation Scheme (FSCS) should no longer reimburse those who have lost sums by dealing with the asset class:

“I would suggest that we just say that anything crypto related should not be entitled to compensation, let consumers know this clearly when they invest.”

The FSCS is the UK statutory deposit insurance and investor compensation scheme for clients of licensed financial services companies. This means that locals are eligible to receive refunds if they fall victim to fraudulent activity in the cryptocurrency markets.

Rathi added that the FCA has seen an increase in requests from digital asset exchanges seeking regulatory approvals in recent months. However, many were “below par” and the watchdog has yet to give them the green light.

The 42-year-old took the reins of the FCA last year when he was named successor to former boss – Andrew Bailey. Throughout his leadership, Rathi has pushed for a more aggressive approach to protecting clients from crypto-related scams.

Nikhil Rathi, Source: The Guardian

Earlier this year, the FCA warned local investors to be wary of the potential risks associated with investing in certain digital asset projects, especially companies that lack regulation and promise high returns. At the time, the regulator reiterated that people working with bitcoin and alternative coins should be prepared to lose all their allocated funds.

Not the first to denigrate crypto

According to David Lingberg – CEO of retail banking at NatWest – the UK is a haven for crypto scammers. Similar to Rathi, he advised people to stay away from the cryptocurrency industry as it is full of scammers who create fake exchanges.

Lindberg went further, saying he had “never seen a worse market” than the UK for scams. In his view, the problem can only be solved if the UK government, police, banks and social media operators join forces and fight the bad actors as a team.

Yet, it is also true that the UK is one of the countries with the strictest cryptocurrency regulations and, objectively, it could hardly be considered a haven for cryptocurrency scammers.

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