The United Kingdom’s Financial Conduct Authority, more commonly known as the FCA, has recently warned consumers in the U.K about dealing with several cryptocurrency firms who are unregistered, with 111 companies in total being called into question. The FCA believes that dealing with these companies is incredibly risky and should therefore be avoided at all costs.
Crypto companies existing in the U.K are required to register themselves with the FCA, which acts as the country’s official financial regulator. Since January 2021, all of the crypto firms were mandated to adhere to the Counter-Terrorist Financing and Anti-Money Laundering laws in addition to the aforementioned registration with the regulatory authority. This is compulsory if the firms desire to function and operate legally within the country. However, many crypto-based companies have yet to register.
Very real risk
The leader of FCA’s enforcement division, Mark Steward, had claimed that the abovementioned unregistered and therefore unregulated cryptocurrency firms represent a serious threat to banks, payment firms and consumers who choose to do any kind of business with them. He added that there are several companies that are conducting illicit activities in the U.K, which makes these entities both illegal in status and dangerous to the public.
To this end, the FCA managed to make a list of all of the unregistered firms so that potential investors may be aware of what they might be getting themselves into. As of now, more than 2 million adults in the country currently hold crypto, but the more alarming statistic is that only a handful of these investors have a thorough understanding of how cryptocurrency assets actually work as well as the related consequences.
FCA remains cautious as FOMO kicks in
One of the main reasons why people enter the crypto industry, to begin with, largely has to do with the fear of missing out (FOMO). When someone hears stories of various individuals becoming ridiculously rich by investing relatively small amounts in crypto, it has hard to resist this kind of temptation, and so many would cave into the pressure and buy crypto themselves. However, lack of proper knowledge and risk assessments often results in more losses than profits for most.
FOMO is a key contributor to the U.K investors becoming increasingly involved with crypto, too, because many feel as if failure to invest in it now would mean that others will receive substantial profits instead of taking the risk.
The FCA, therefore, tends to adopt a very cautious and restrictive approach as far as cryptocurrencies are concerned, which had also resulted in the ban on various cryptocurrency derivatives platforms back towards the beginning of the year.