.svg)
The UK’s Financial Conduct Authority (FCA) has opened hundreds of crypto-asset cases as it looks to purge bad actors in the consumer investment market.
The FCA has revealed that it has opened more than 300 cases relating to possible crypto-asset businesses not registered with the FCA over a six-month period, as part of wider action to tackle consumer harm from bogus investments.
Many of these may be scams the regulator has said, while it also has 50 live investigations, including criminal probes, into unauthorised businesses.
“Consumers need to have confidence when making investment decisions and the data we’ve published today shows how prevalent scams can be,” said Sarah Pritchard, FCA executive director.
She continued: “Before investing, check you know who you are really dealing with, check if they are authorised by the FCA and do your research to understand the risks that might be posed.”
Between April and September last year, the FCA revealed that it had received 16,400 enquiries about possible scams. This is up nearly a third compared with the same period in 2020.
The top types of scams being reported to the FCA included crypto-assets as well as so-called boiler room and recovery room scams.
In boiler room scenarios, salespeople will apply high-pressure sales tactics to persuade investors to purchase securities, including those that are speculative and fraudulent.
Recovery room scams typically occur subsequent to a boiler room example. Here, the perpetrators may contact their victim again while pretending to be from a different firm.
Alternatively, the criminals may opt to sell on their details to other recovery rooms.
Consumer harm
The FCA has attempted in recent times to create better outcomes for consumers and their risk of falling for financial scams.
For example, the ScamSmart campaign which launched in 2015, encourages those considering investing to check its dedicated website. This features an online tool and the Warning List, which allows users to find out more about the risks associated with an investment and view a list of firms the FCA knows are operating without its authorisation.
The latest data shows a quarter of applications from consumer investment firms wanting to join the market are being stopped by the FCA.
The proportion is up from one in five in the last financial year.
Nine of these firms were prevented from gaining authorisation as it was suspected that individuals responsible for unsuitable advice tried to avoid the consequences of their actions by moving to or setting up new firms, or individuals set up and sought authorisation for a new firm before their existing firm started to receive complaints about poor past advice.
Hard line on unregistered crypto
The FCA has been taking a no-nonsense approach to crypto for some time. In early 2021, the FCA told unregistered crypto firms to close down and return funds to investors, in line with a schedule laid out by the regulator at the start of 2020.
It warned that crypto businesses that had not applied to register with the FCA by December 15, 2020, or that had withdrawn an application, must cease crypto activities before January 10.
It also has not been frightened to crackdown on the big players. In Summer 2021, Binance, which is the world's biggest cryptocurrency exchange, was issued a warning by the regulator.
The FCA ruled that the firm cannot conduct any "regulated activity" in the UK.
It has also previously called out other crypto firms for failing to comply with money laundering and illicit financing rules.
However, there are signs that the FCA is struggling to keep up with the crypto wave. Last year, for example, it had to extend its deadline for crypto firms' temporary permissions scheme to the end of March 2022.
