According to the Financial Conduct Authority, losses from crypto-related investments shouldn’t be eligible for compensation programs because they can spread serious crime.
Nikhil Rathi (FCA’s chief executive) stated that there was a need for “some pretty clear lines” to be drawn around the Financial Services Compensation scheme when it comes to individual crypto asset investors.
Rathi stated that they have been a source of serious organised crime and money laundering. Anyone who invests in them should be prepared to lose their entire money,” Rathi told Parliament’s Treasury Select Committee.
Rathi stated, “I would suggest that we simply state that any crypto-related matter should not be eligible for compensation and that consumers are aware of that fact when they invest.”
If investors lose money due to financial firms that break rules or make egregious mistakes, they may be eligible for legal compensation.
Although the FCA has witnessed a rise in applications from crypto exchanges, Rathi stated that many were “below par” and resulted in a high number of applications being rejected or withdrawn.
Rathi acknowledged the concerns of lawmakers about backlogs in authorisation for financial firms and stated that 100 staff were being hired, as well as a tender to recruit more people with cryptoassets skills.
Financial firms that apply for authorisation will be subject to greater scrutiny, he warned. The FCA was criticized in a report on its handling of London Capital & Finance. It said that the FCA should be more stringent when granting licenses and to check applicants’ financial resilience.
Rathi stated, “We live in a world where we are putting more gritty into the system.”
He supported internal pay and bonus reforms that will see some staff paid less next year while the salaries of the lowest-paid employees get bumped up.
Rathi assumed the helms of the company a year ago. He has worked to make internal changes to create an aggressive watchdog to protect consumers from scams.
One lawmaker wondered why the FCA spent nearly half a billion pounds on an outside communications company during the period of transformation.
Rathi responded, “We are going through deep and wide-ranging changes.”
