Cryptocurrency start-up businesses have become of increasing interest to the industry regulator the UK Financial Conduct Authority (FCA), according to an investigation by the Financial Times newspaper. The FCA has increased its investigations into digital currency operations by 74 per cent, according to the paper, with the current number of start-ups under investigation standing at 87.
Back in 2018, wealth management firms reportedly asked the FCA to boost the regulatory regime surrounding the crypto-industry amid fears that many businesses saw the platform-based technology as way of getting rich quickly.
The FCA issued a policy statement, Guidance on Cryptoassets, in July 2019. “A combination of market immaturity, volatility, and a lack of credible information or oversight raises concerns about market integrity, manipulation and insider dealing within cryptoasset markets,” the guidance said. “This may prevent the market from functioning effectively and damage its reputation.”
The guidance outlined which of a broad number of cryptocurrency assets fell within the FCA’s regulatory remit in the burgeoning market. The FCA was also said to be considering whether to ban digital currency-based derivative products in the Financial Times report.
While cryptocurrency risk may be considered as a niche part of the overall financial landscape, Facebook’s plans to introduce Libra on its platform could take it mainstream. In July, Facebook published details of the cryptocurrency, which would enable people on its platform to send money or buy products and services without using traditional cash.
Libra is built on the Libra Blockchain owned by the Libra Association, an independent, not-for-profit membership organization headquartered in Geneva, Switzerland, according to Facebook’s white paper on the launch – expected in 2020. As well as Facebook current members of the association include Mastercard and Visa, eBay, Uber, Vodafone and several other companies. It aims to have 100 members by the first half of 2020.
The plans to build members have not gone smoothly. Regulators in France and Germany have threatened to block use of the cryptocurrency in their countries. And in October 2019 the BBC reported that the payments firm Paypal had pulled out of the project.
Facebook said in its white paper that Libra would be independently-managed and backed by real assets, and that paying with it would be as easy as texting. But the BBC reported that there had been concerns about how people’s money and data will be protected, as well as over the potential volatility of the currency. The Group of Seven advanced economies warned in July that it would not let Libra proceed until all regulatory concerns had been addressed, it said.