By Mark Hunter
15 hours agoWed Nov 27 2024 09:36:48
Reading Time: 2 minutes
- A parliamentary report has criticized the Financial Conduct Authority (FCA) for significant regulatory failures
- The FCA’s approach to cryptocurrency regulation has been described as overly stringent, potentially stifling innovation
- Calls for comprehensive reforms have been made to enhance the FCA’s effectiveness and accountability
The UK’s financial regulatory watchdog, the Financial Conduct Authority (FCA), has been ctriticized as “incompetent at best, dishonest at worst” by the All-Party Parliamentary Group (APPG) on Investment Fraud and Fairer Financial Services. The report has highlighted substantial deficiencies in the FCA’s regulatory performance, including its handling of financial scandals and its stringent approach to cryptocurrency regulation, suggesting that these issues may hinder the UK’s position as a financial innovator. The FCA has taken a strong stance against the crypto sector, leading to huge difficulties for British citizens in buying into the sector.
Regulatory Failures and Criticisms
The APPG’s investigation, which spanned nearly three years and included testimonies from 175 individuals—including fraud victims, whistleblowers, and former FCA employees—paints a troubling picture of the regulator’s operations. The report describes the FCA as “incompetent at best, dishonest at worst,” citing slow and inadequate actions, and a lack of transparency and accountability among its leadership.
Bob Blackman, co-chair of the APPG, emphasized the severe impact of these regulatory failures, noting that they have caused significant financial and emotional distress to consumers and small businesses.
Crypto Crackdown Criticized
In addition to general regulatory shortcomings, the FCA’s approach to cryptocurrency regulation has come under scrutiny. The regulator has implemented strict measures, including comprehensive anti-money laundering supervision and rigorous authorization processes for crypto firms. This has been done under the guise of consumer protection, but it has led to most banks refusing to allow interaction with even regulated crypto exchanges and customers having their accounts closed for doing so.
Since January 2020, the FCA has only approved 14% of crypto business applications, leading to concerns that such stringent oversight may stifle innovation and deter crypto firms from operating in the UK. This attitude runs contrary to the UK’s desire to be a blockchain hub.
Calls for Comprehensive Reforms
In response to these findings, the APPG has called for a radical overhaul of the FCA to enhance its effectiveness and accountability. Recommendations include establishing a supervisory council, revising funding structures, and enforcing greater accountability measures. The report suggests that without significant reforms, the FCA’s deep-rooted cultural problems will persist, potentially undermining the UK’s financial sector and its aspirations to be a leader in financial innovation.
The FCA has acknowledged the criticisms and highlighted recent improvements under Chief Executive Nikhil Rathi, such as structural changes and increased technology investments. However, the parliamentary group remains skeptical, emphasizing the need for substantial reforms to address the regulator’s longstanding issues.
