London wants American crypto refugees | WIRED

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Sunak governments’ desire to attract crypto could give impetus to attempts to build a more comprehensive regime for the industry. But it could also create competing incentives. Critics of the governments’ approach say they fear that speeding up regulations and giving the crypto industry too much leeway could lead to decisions that put consumers at risk, or end up undermining longstanding attempts to prevent financial crimes, such as money laundering and terrorism. funding.

The message lobbyists are sending to politicians’ ears is that crypto needs tailor-made rules if the UK is to keep pace with financial innovation, says Martin Walker, director of banking and finance at the Center for Evidence Based Management, a non-profit organization that advises companies on management strategy. Walker, who testified in a 2018 government inquiry into crypto, says flexibility driven by crypto anxiety risks repeating previous boom and bust cycles in finance. After the dotcom bubble, which involved a lot of fraud, and the 2007 financial crisis, caused by bad financial innovation, it’s as if the lessons have been completely forgotten, he says.

The British capital sneeringly described as Londongrad or Moscow-on-Thames ‘for its past willingness to welcome money from Russia and other pariah states already has an unsavory reputation as a place for money laundering and other financial crimes, says Stephen Diehl, a crypto-skeptical commentator “Inviting crypto into the fold would only give more ammunition to its critics. I don’t think the prevailing opinion is that we want to become a laundromat of black money,” he says.

Some members of Sunak’s own party also disagree with his take on crypto. In May, a report by the Treasury Select Committee, a cross-party group of MPs, claimed that cryptocurrencies serve no useful social purpose and expose consumers to fraud and scams. He also claimed that crypto trading should be regulated as a form of gambling, not a financial service, or risk a halo effect that creates a false sense of security.

To avoid glorifying crypto, the FCA has historically taken a cautious approach. Given the volume of damage, our position has always been that this is a high-risk investment, says Matthew Long, director of payments and digital assets at the FCA. We have been clear that people have to be prepared to lose their money.

Given that the UK’s ability to attract crypto businesses to its shores depends on the tenor of its eventual regulatory regime, there are concerns that the FCA could come under political pressure to soften its stance as it draws up a regulation.

The Sunaks plan, says McAteer, imposes a secondary and potentially very dangerous objective: economic growth. This creates an opening for political interference as the FCA drafts crypto regulations, he says, when it should be free to prioritize the public interest.

As long as there are few specific rules in the UK and political promises remain vague, this fear will remain amorphous and vague. It is unclear whether crypto firms could be granted more lenient reporting requirements, for example, or be allowed to offer riskier financial products, such as crypto derivatives, or be free to save money when storage of client cryptography. But the idea that third parties might be able to meddle in rule-making is worrying, suggests McAteer, and regulators could find themselves under pressure if they make decisions that interfere with the political agenda. The FCA will be dragged before select committees and the Treasury, McAteer says, and criticized if it is seen as stifling innovation. The Treasury did not return a request for comment.

The FCA rejects the idea that government or industry players could be allowed to puppeteer: Were an independent regulator, Long says. Once our scope is defined, we do our job, which is to create rules.

But the ability of regulators to fulfill their protective function, McAteer says, depends on their ability to ignore calls from industry and steer clear of political machinations. It’s a very bad sign when there’s a confluence of media hype and government pressure, he says. This is when mistakes are made.

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