The Financial Conduct Authority’s warning last week against FTX came as the cryptocurrency exchange was trying to secure a UK licence, setting up fresh tensions between the market watchdog and offshore crypto players.
The FCA last Friday said the Bahamas-based crypto asset platform run by Sam Bankman-Fried was “targeting people in the UK” without authorisation and warned consumers against dealing with the company.
Bankman-Fried told the Financial Times the warning came as a “surprise” after FTX had been “in discussion with the FCA about licensing for a while”.
The stand-off between the UK regulator and FTX, one of the world’s largest digital asset companies, comes as the UK government has sought to make the country an attractive place to do business for international crypto groups after criticism that the FCA is hostile to the sector.
FTX initially cast doubt on the meaning of the FCA’s consumer warning, claiming that the regulator intended to alert consumers to a scam impersonating the company. FTX said the phone numbers cited in the FCA’s statement were not actually used by the exchange and have been linked to scams.
However, people with direct knowledge of the FCA’s process said the warning referred to FTX itself. The scam phone numbers may have been included in error, the people said.
The FCA said the phone numbers had since been removed, and that it would not normally contact a company ahead of a warning notice unless the firm was UK registered. It declined to comment further.
Bankman-Fried said his company has tried to follow UK rules. “We believe we are in compliance with UK regulations but will as always act promptly if we receive any guidance from regulators,” he said.
Companies that provide trading or storage of crypto have to register with the FCA for anti-money laundering supervision if their digital asset activity is “carried on by way of business in the UK”, according to an FCA guide. They also need the normal licences to handle regulated activities such as payment and derivatives.
But overseas crypto companies are generally allowed to serve British customers provided they do not have operations or try to sell their services in the UK.
The FCA’s crypto registration regime became a point of contention last year as companies and lawyers complained about a lack of qualified staff at the regulator and protracted delays. The FCA blamed the slow progress in part on the poor quality of crypto firms’ applications and defended its stringent approach.
UK ministers have since tried to strike a more positive tone, pledging to make Britain a “global hub” for digital assets and arguing the openness to digital assets is key to the country’s competitiveness in financial services after Brexit.
The FCA last year clashed with Binance as the world’s largest crypto exchange sought to secure a UK licence. After Binance bought an FCA-regulated entity, the regulator issued a series of public rebukes against the company saying its “complex and high-risk financial products” posed “a significant risk to consumers”.
Binance, a major rival of FTX, subsequently withdrew its application but has said it intends to repair relations and reapply for UK supervision.
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