During an inquiry session on Wednesday, the CEO of the UK's FCA, Nikhil Rathi, informed the Treasury Select Committee that the agency cannot establish a regulatory structure for cryptocurrency investors that would protect them from financial losses.
While the FCA can enforce anti-money laundering rules and require crypto firms to register, it lacks the authority to safeguard consumers against losses. Even with the forthcoming Financial Services and Markets Bill, which expands the FCA's regulatory powers, consumer loss protection is not included. Rathi stated that no framework can provide such protection and that people should not expect compensation. FTX and Celsius's recent collapses have cost the crypto market billions, resulting in 80,000 UK crypto traders losing their funds due to FTX's bankruptcy.
Newly appointed FCA Chair Ashley Adler emphasized that the crypto sector requires "tough" regulatory oversight to "detoxify." So far, just 14% of crypto companies that have tried to register with the FCA have been approved, with most applications being "exceptionally" poor. The agency must do a better job communicating its expectations.