NatWest Introduces Crypto Caps To Prevent Loss Of ‘Life Changing’ Sums – Forbes Advisor UK
What’s the latest news from the world of cryptocurrency? We monitor all the latest moves and keep you updated regularly with the key developments.
The UK financial regulator, the Financial Conduct Authority, has issued repeated warnings about the risks faced by those who invest in cryptocurrency, stating that all funds are at risk and investors could lose everything. Cryptocurrency trading is largely unregulated in the UK and no compensation arrangements are in place.
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14 March: Bank Follows Nationwide With Daily Trade Limits
NatWest is limiting cryptocurrency transactions after UK consumers lost £329 million to scams last year.
It will enforce a daily limit of £1,000 and a 30-day limit of £5,000 on payments to cryptocurrency exchanges to prevent customers from losing “life changing sums of money”.
Crypto isn’t covered by the Financial Services Compensation Scheme (FCSC), which means victims of scams aren’t entitled to any help.
NatWest’s Stuart Skinner said: “We have seen an increase in the number of scams using cryptocurrency exchanges and we are acting to protect our customers.
NatWest’s announcement follows similar moves from Nationwide, which earlier this month blocked its customers from using its credit cards for crypto transactions. It also introduced a daily limit of £5,000 for crypto purchases.
NatWest notes that men over 35 are most at risk of crypto scams as they’re more willing to take on risky investments. The bank believes the cost-of-living crisis is making people more vulnerable to scams.
Mr Skinner added: “You should always have sole control of your cryptocurrency wallet and nobody else should have access. If you didn’t set the wallet up yourself or can’t access the money then this is likely to be a scam.”
1 March: UK ‘Digital Pound’ Years Away, Says Deputy Governor
A ‘digital pound’ could still be five years away, if it even materialises at all, a senior Bank of England official told MPs yesterday.
The Treasury has been consulting on the case for a central bank digital currency (CBDC) for some months, working closely with the Bank.
Yesterday, the cross-party Treasury Select Committee of MPs met with the Bank of England’s Deputy Governor for Financial Stability, Sir Jon Cunliffe, to hear latest developments.
A CBDC is currency issued and administered by a country’s central bank, such as the Bank of England. But instead of being physical money (notes and coins) it is in digital (or electronic) form.
All transactions using this digital currency are also recorded in digital form – such as on an encrypted database.
Asked whether the Bank has the technical skills to create a CBDC, Sir Jon said no, but that he hoped it would by the time a case for a digital pound was proven. He said it would also involve working with the private sector to build and test a prototype.
CBDCs have been criticised as a solution in search of a problem, and the committee quizzed the Deputy Governor on the justification for creating one. Sir Jon explained that a CBDC could solve problems that don’t yet exist, but are expected based on the trajectory of the ongoing crypto revolution.
He pointed out that the Apple iPhone launched with 15 apps that performed functions people could already do with other devices, but spawned an entire market of additional apps.
Giving an example of how a CBDC might be used, Sir Jon said consumers could make ‘microtransactions’ – fractional payments for items such as individual news articles instead of paying for all-encompassing subscriptions.
14 February: Unauthorised ATMs Swapping Currency In Leeds
The Financial Conduct Authority (FCA), which regulates financial products and services in the UK, has been looking into reports of suspected crypto ‘cashpoints’, writes Mark Hooson
An investigation by the regulator in partnership with West Yorkshire Police found several machines in Leeds that allowed users to exchange normal currency for crypto assets.
Detective Sergeant Lindsey Brants of West Yorkshire Police’s Force Cyber Team said: “Warning letters were issued requesting the operators cease and desist using the machines and that any breach of regulations would result in an investigation under money-laundering regulations.”
While the cryptocurrency market is as yet unregulated in the UK, crypto exchanges, including ATM operators, must register with the FCA and comply with UK money laundering regulations.
No UK firms are currently registered to run such ATMs.
The watchdog has previously warned crypto ATM operators to shut down their machines or face enforcement action. The FCA is considering further enforcement action based on the evidence collected in Leeds.
The government is currently consulting on plans to bring the crypto market into the kind of regulation that currently protects consumers of traditional financial services.
7 February: Digital Pound Would ‘Complement’ Not Replace Cash
The government and the Bank of England have opened a consultation on the creation of a UK central bank digital currency (CBDC) – a digital pound – by 2030, writes Andrew Michael.
The Treasury said it would be used to complement cash and to form an official bulwark against potential rival offerings from the technology sector.
The plan is for the UK’s CBDC, which would be issued by the Bank of England and held in smartphone wallets, to be inter-changeable with cash and bank deposits so that it “could be used by households and businesses for everyday payments in-store and online”.
Unlike cryptoassets and stablecoins, the digital pound would be issued by the Bank of England, not the private sector. The Treasury said: “This means that it will have intrinsic value and not be volatile, unlike unbacked cryptoassets, as there would be a central authority to back it”.
Despite a recent uptick in the use of coins and notes, as people manage their budgets more carefully thanks to the cost-of-living crisis, the overall use of cash has fallen since the pandemic.
With cash in long-term decline, government ministers and bank officials believe there is likely to be increased interest for a government-backed digital currency.
Officials also believe that a domestic digital currency would allow the Bank to keep control of the core of the UK’s financial system and prevent private companies from keeping payments within a closed network.
The Treasury says a formal decision about whether to go ahead with a digital pound will not be made for at least two years. The Treasury and the Bank of England consultation will allow further research and development work, while asking the public to give their views.
Should it receive the green light, the earliest stage at which a digital currency could be launched would be the second half of this decade.
Countries around the world, including the US, China and those in the Eurozone, are weighing up similar moves.
Jeremy Hunt MP, Chancellor of the Exchequer, said: “While cash is here to stay, a digital pound issued and backed by the Bank of England could be a new way to pay that’s trusted, accessible and easy to use. That’s why we want to investigate what is possible first, while always making sure we protect financial stability.”
Andrew Bailey, governor of the Bank of England, said: “As the world around us and the way we pay for things becomes more digitalised, the case for a digital pound… continues to grow. A digital pound would provide a new way to pay, help businesses, maintain trust in money and better protect financial stability.”
Critics of CBDCs fear that they might be used to track the spending patterns and financial behaviour of individuals, although the government has stated that no such records will be kept.
Proponents of the original cryptocurrencies, such as bitcoin and Ethereum, also argue that the whole crypto movement is grounded in the desire to create a financial environment that is not part of official central bank machinery.
As part of the process, the Treasury and the Bank of England have published a consultation paper The digital pound: a new form of money for households and businesses that contains a series of survey questions to which responses from the public and other parties will form the basis for future work on the subject.
The deadline for responses is 7 June 2023.
1 February: Regulation To Bring Crypto Into Mainstream
The UK government has today laid out its plans to regulate the cryptocurrency market, writes Mark Hooson.
The plans would bring regulation of the sector into line with regulation of traditional financial products and aim to “provide confidence and clarity” to consumers and businesses.
Under the consultation plans, on which the Treasury is seeking stakeholder views until the end of April, the government will:
- protect investors’ money when a crypto business goes bust
- ensure crypto promotions are clear, fair and don’t mislead
- strengthen data-reporting requirements of crypto firms
- introduce measures to prevent ‘pump and dump’ schemes in which a person or organisation artificially inflates the value of an asset for profit.
Andrew Griffith MP, economic secretary to the Treasury, said: “Effective regulation will create the conditions for cryptoasset service providers to thrive in the UK, and give people and businesses the confidence to invest with an understanding of the often high risks involved.”
Parliament’s ongoing discussions about crypto regulation were drawn into sharp focus by the collapse of the FTX crypto exchange in November last year.
The volatility of the crypto market has seen its biggest asset, Bitcoin, lose more than 60% of its value since its November 2021 peak.
Rishi Sunak MP, Prime Minister and former Chancellor of the Exchequer, is known to be an advocate for crypto assets. Last spring he outlined ambitions for the UK to become “a global hub for crypto-asset technology and investment” and went as far as to commission the Royal Mint to create a Non-Fungible Token (NFT).
NFTs are a form of unique digital asset. The ‘NFT For Great Britain’ has yet to materialise, with a Royal Mint web page still soliciting sign-ups for updates. Meanwhile, the NFT market has all but collapsed.
Bored Ape Yacht Club NFTs, which were among the most high-profile assets after receiving widespread celebrity backing, have crashed in value by as much as 82% from their April 2022 peak.
Laith Khalaf, head of investment analysis at AJ Bell, said: “It was inevitable that crypto would come under increased scrutiny from global regulators after the FTX scandal, and the Treasury has now laid down a series of proposals designed to protect consumers and preserve financial stability.
“The proposed regulations are not a silver bullet that will guarantee absolutely no consumer harm stems from the crypto industry, but they do provide a more robust regulatory framework that is several steps closer to that applied to more mainstream financial activities.”
24 January: UK Cities Trail Europe In Using Cryptocurrency
Cities in the UK lag behind those in Europe in terms of paying with cryptocurrencies, according to new data, writes Mark Hooson.
London saw £7.5 million worth of crypto transactions between January 2019 and September 2022, a figure significantly lower than comparable cities in the European Economic Area (EEA).
Research conducted by finance platform Solaris found Paris, France recorded the most crypto transactions during that period, with payments worth £22 million.
Madrid in Spain had the second most transactions, with payments worth £16.8 million, followed by Berlin, Germany at £16.6 million and Sofia, Bulgaria at £13.8 million.
The £7.5 million spent in London accounted for 37% of the UK’s cryptocurrency transactions. Other British cities recorded far smaller numbers, with Birmingham, Leeds and Glasgow accounting for 3%, 1% and 0.3% of the total spend, respectively.
The average value of each crypto transaction was £40 and typically paid for money transfers, hotel bookings and online ecommerce in retailers such as Amazon.
People aged 21-42 made 72% of all crypto transactions, while 24% were made by those aged 43 to 64. Under 21s and over-65s each made up an equal 2% share of the payments.
Ben Hall at Solaris said: “We are increasingly seeing brands beginning to accept cryptocurrencies as a payment option. However, the real key to making crypto spending successful lies in enabling consumers to spend both fiat and cryptocurrency instantly at the point of sale via contactless payment.”
4 January: Federal Reserve Alert To ‘Significant Threat’ To Financial System
The US central bank has warned that cryptocurrencies pose a “significant” threat to the wider banking system, writes Mark Hooson.
In a joint statement, the Federal Reserve and US regulators including the Office of the Comptroller of the Currency – a branch of the US Treasury – said that risks related to the crypto industry must not be allowed to migrate to the banking system.
Citing the “significant volatility” of the industry in the past year, the Fed said banking organisations should be aware of key risks including scams and fraud and inaccurate or misleading representations and disclosures by crypto-asset companies.
The unprecedented warning came two months after the $1 billion collapse of the FTX crypto exchange and moments before its co-founder and ex-CEO, Sam Bankman-Fried, pleaded not guilty to eight counts of wire fraud, securities fraud, and conspiracy.
If found guilty, Mr Bankman-Fried could face more than 100 years in prison for his alleged role in the exchange’s collapse.
Last month, Ashley Alder, the incoming chair of the UK financial regulator, the Financial Conduct Authority (FCA), said crypto exchanges can facilitate money laundering.
At present, cryptocurrency trading is largely unregulated in the UK. Consultations about bringing it into UK regulation as part of the Financial Services and Markets Bill are ongoing.
Laith Khalaf, head of investment analysis at AJ Bell, said: “This is a significant public intervention and a clear shot across the bows for both the banking and crypto industries, which shows how concerned regulators are about crypto risks spilling over into mainstream financial institutions.
“Those who remember how a downturn in the US housing market led to the collapse of Lehman Brothers may well be wondering if crypto is the new version of the disreputable mortgage-backed security, a complex financial product which permeated the banking industry and helped to foment the global financial crisis”
19 December: Alder Says Platforms Should Face Further Regulation
Ashley Alder, who will chair the Financial Conduct Authority from 20 February next year, told the House of Commons Treasury Committee last week that crypto platforms are “deliberated evasive” and a method by which “money laundering happens at size”
Mr Alder, who is the CEO of the Securities and Futures Commission of Hong Kong until the end of the year, was asked for his views by Harriet Baldwin MP, chair of the committee and Conservative member for West Worcestershire: “Can you just tell us, very quickly, what your view is overall in terms of crypto assets and cryptocurrency? Do you own any? Should they be regulated further in the UK?”
Mr Alder replied: “I do not own any and they should be regulated further.
The point is this: when it comes to crypto assets, as distinct from the underlying blockchain, our experience to date of platforms… is that they are deliberately evasive. They are a method by
which money laundering happens at size.
“More importantly, from the public’s perspective, the way in which they bundle a whole set of activities that are normally segregated in conventional finance gives rise to massively untoward risk, whether it is segregation of assets or conflicts of interest.”
Mr Alder’s tough stance, in the wake of the collapse of the FTX platform last month, raises the prospect of FCA intervention in the crypto market in 2023. At present, the market is largely unregulated, and the regulator has repeatedly issued warnings to UK investors about the risks involved in investing in crypto currency.
14 November: Binance Not At Fault For FTX collapse, MPs Hear
Crypto exchange Binance defended itself against claims of responsibility for the recent collapse of rival firm FTX today, in an exchange with members of parliament in a Treasury Committee meeting, writes Mark Hooson.
FTX filed for bankruptcy last week after questions over its liquidity led to a run on the exchange – see story below. Binance looked poised for a buyout but walked away from the deal before offloading its holdings of FTT – the native currency of FTX.
Binance’s European head of government affairs, Daniel Trinder told the Committee that, while the company had begun the process of buying FTX, it pulled out of the proposed deal when due diligence checks revealed “something was very wrong”.
Mr Trinder told the Treasury Committee, which convened for the first time to discuss the future of cryptocurrency in the UK, it wasn’t Binance’s intent to cause FTX’s collapse. He said the company’s failure had set the industry back “a couple of years”.
CryptoUK’s Ian Taylor and Ripple’s Susan Friedman also gave evidence to the committee, which heard arguments for formal regulation to protect investors. Also giving evidence, Galaxy Digital’s Tim Grant said the industry had a “governance problem, not a crypto problem”.
10 November: FTX On The Brink After U-Turn On Bailout Talks
In a swift U-turn, Binance has abandoned its plan to rescue arch-rival FTX, the beleaguered cryptocurrency exchange beset by a wave of customer withdrawals earlier this week that left it suffering from a severe liquidity crisis, writes Andrew Michael.
Yesterday (Wednesday), it appeared that a deal had been struck that, subject to corporate checks, would have resulted in Binance’s takeover of FTX (see story below).
Less than 24 hours later, however, the arrangement lay in ruins after Binance cited concerns about FTX’s business practices and investigations by US financial regulators.
“As a result of corporate due diligence, as well as the latest news reports regarding mishandled customer funds and alleged US agency investigations, we have decided that we will not pursue the potential acquisition of FTX.com,” Binance said in a statement late on Wednesday.
“Our hope was to be able to support FTX’s customers to provide liquidity, but the issues are beyond our control or the ability to help,” the company added.
Binance and FTX are two of the crypto industry’s largest offshore exchanges. FTX was forced to ask Binance for a bailout after customers tried to withdraw $6 billion 72 hours – the crypto equivalent of a run on a bank, where a large group of depositors simultaneously withdraw their money from an institution fearing it will become insolvent.
Binance’s decision to walk away from a bailout has plunged the future of FTX into fresh doubt, as it emerged that the company’s relationship with FTX founder Sam Bankman-Fried’s other businesses was set to be investigated by US regulators.
In the past, Mr Bankman-Fried has been hailed as the ‘white knight’ of the cryptocurrency industry, after he stepped in to provide hundreds of millions of dollars to other struggling crypto businesses in the face of the so-called ‘crypto winter’.
This event took place earlier in 2022 when the price of Bitcoin, the world’s largest cryptocurrency, plunged below the $20,000 mark for the first time in two years.
On Wednesday, Bitcoin’s price dropped just over 12% to leave the coin trading at a shade over $16,000. In November last year, Bitcoin reached an all-time peak of around $69,000.
In light of recent events, analysts at JP Morgan Chase have warned that Bitcoin could lose 80% of its value amid “a cascade of margin calls”. In a note, the Wall Street bank said Bitcoin could tumble as low as $13,000.
9 November: FTX Reaches Out For Help After Surge In Withdrawals At Exchange
The digital assets industry has been left reeling following the near collapse of FTX, one of the largest cryptocurrency exchanges, which secured a bailout deal with arch-rival Binance, after a wave of customer withdrawals led to a liquidity crisis, Andrew Michael writes.
A merger of the two largest offshore cryptocurrency exchanges comes in the wake of a public stand-off between Binance chief executive, Changpeng Zhao, and FTX’s boss, Sam Bankman-Fried that prompted a bank run at the latter’s exchange and resulted in a forced sale of the business yesterday (Tuesday 8 November).
The companies did not immediately disclose terms, but the deal ends the spat between Bankman-Fried and Zhao who are two of the most influential figures within the crypto sector.
Cryptocurrency investors were rattled last weekend when Zhao said he would liquidate his firm’s holdings in his rival’s FTT token. On Monday this week FTX experienced net outflows of $653 million as investors moved their assets off the exchange. FTT’s value then plunged further following reports that the exchange had paused withdrawals.
The effect of this was felt in the wider cryptocurrency market where Bitcoin, the largest and most traded coin, fell in value by nearly 14% hitting a two-year low. Ether, another high-profile coin, also dropped in value to just under $1,300.
“This afternoon, FTX asked for our help. There is a significant liquidity crunch,” Zhao tweeted on Tuesday. “To protect users, we signed a non-binding LOI [letter of intent], intending to fully acquire FTX.com and help cover the liquidity crunch,” he added.
The news was confirmed when Mr Bankman-Fried tweeted: “Things have come full circle, and FTX.com’s first, and last, investors are the same: we have come to an agreement on a strategic transaction with Binance for FTX.com (pending a DD [due diligence] etc).”
In September, the UK’s financial watchdog, the Financial Conduct Authority (FCA), issued a warning that Bahamas-based FTX was operating unauthorised digital asset services in the UK. Last year, the FCA issued a similar warning about Binance saying it was not permitted to undertake any regulated activity in the UK.
Earlier this spring, the FCA doubled down on its crypto asset register, a list that requires firms who operate in the crypto space to meet the FCA’s anti-money laundering standards.
The FCA regularly warns consumers that investing in crypto assets is highly speculative with the potential for total losses with no recourse to compensation.
26 October: Bill Extends Proposed Scope Beyond Stablecoins
Cryptocurrencies could become regulated in the UK following a vote in Parliament yesterday (Tuesday).
The House of Commons held a reading of the Financial Services and Markets Bill, featuring an amendment put forward to bring cryptocurrencies into the scope of regulated financial services.
It would mean crypto companies would have to play by government rules put in place to protect consumers, and could face fines or lose their licences if they fail to do so.
The Financial Services and Markets Bill previously proposed to only bring stablecoins into regulators’ purview, but Treasury minister Andrew Griffith’s amendment yesterday was welcomed by the voting parliamentarians.
The MP said: “The substance here is to treat them like other forms of financial assets and not to prefer them, but also to bring them within the scope of regulation for the first time.
“The Treasury will consult on its approach with industry and stakeholders ahead of using the powers to ensure the framework reflects the unique benefits and risks posed by crypto activities”
The vote of approval follows the appointment of the UK’s first pro-crypto Prime Minister, Rishi Sunak (see story below).
The Financial Services and Markets Bill will now make its way to the House of Lords for its next reading before potentially being given royal assent and passed into law.
25 October: Ex-Chancellor Keen On Stablecoins And NFTs
With Rishi Sunak taking the reins of government today, Britain now has a crypto-enthusiast in its highest seat of power.
Mr Sunak, who has replaced Liz Truss as Prime Minister, has been vocal about his support and ambitions for crypto assets in the UK during his time in government.
In April, the then-Chancellor announced plans to bring stablecoins – crypto assets whose value is linked to a fiat currency such as the US dollar or sterling – would be brought into regulation as part of the Financial Services and Markets Bill, paving the way for their use in the UK as a recognised form of payment.
The announcement was part of a package of measures which also included working with the Royal Mint on a Non-Fungible Token (NFT) and assembling a Cryptoasset Engagement Group to work more closely with the industry.
Previously, in the summer of 2021, Mr Sunak proposed a Central Bank Digital Currency (CBDC), unofficially dubbed ‘Britcoin’. A CBDC is a form of digital currency, not technically a cryptocurrency, since it is issued by a central bank.
CBDCs are intended to make digital payments convenient, anonymous, secure and less volatile than cryptocurrencies. They serve as a digital analogue for cash, rather than simply facilitating account to account money transfers.
The plans have been in a state of relative uncertainty since former Prime Minister Boris Johnson resigned his post. Johnson was replaced by Truss, who appointed Jeremy Hunt as chancellor. PM Sunak has yet to make any appointments to his cabinet, but is reasonably expected to keep Hunt in his post.
11 October: Finance Chiefs Told To Tackle Threat To Stability
Regulation of crypto-assets and the cryptocurrency market will be high on the agenda at the meeting of G20 finance ministers and central bank governors in Washington later this week.
The Financial Stability Board – the international body that recommends ways to improve the oversight and functioning of global markets – is urging countries to adopt regulatory frameworks that “promote the comprehensiveness and international consistency of regulatory and supervisory approaches.”
At present, regulation of crypto around the world is patchy and in some locations, including the UK, effectively non-existent. The UK regulator, the Financial Conduct Authority, has repeatedly warned crypto investors that they have no protection if their investment turns sour.
Klaas Knot, chair of the Board, says in a letter to the G20 that recent crypto market turmoil has underlined the need for a universal and all-embracing approach to crypto-asset regulation: “The current ‘crypto winter’ has reinforced our assessment of existing structural vulnerabilities in these markets.
“Concerns about the risks they pose to financial stability are therefore likely to come back to the fore sooner rather than later, as are public expectations that policymakers have in place a robust international framework to identify, monitor and address those risks.”
The Board has no powers to impose rules in any jurisdiction, but it is seen as highly influential among policymakers. It is seeking greater oversight of any type of crypto-asset activity, as well as crypto-asset trading platforms, that it says may pose risks to financial stability.
More generally, the Board says governments need to develop a better understanding of the broader macrofinancial implications of cryptoassets: “Once the work is completed, the appropriate regulation of crypto-assets, based on the principle of ‘same activity, same risk, same regulation’, will provide a strong basis for harnessing the potential benefits associated with this form of financial innovation while containing its risks.”
David Hamilton at lawyers Pinsent Masons said: “The recommended more harmonised approach is a welcome development as the decentralised nature of crypto assets has contributed to a fragmentation of regulation, with some governments taking wildly different approaches.
“The project will have its fair share of challenges to surmount. If the Board has no power actually to impose laws, how will the executives, legislatures, and judiciaries of each G20 member state react when it comes to implementing and interpreting the transposition of a harmonised framework into domestic law?
“Particularly notable is the letter’s indication that the proposed recommendations aim to cover any type of crypto-asset activity. In the UK, the FCA’s regulatory perimeter only extends so far. Security tokens and other crypto assets that behave like e-money are caught, while exchange tokens like Bitcoin remain unregulated investments.
“While moves are afoot to extend the UK’s financial promotions regime to a broader range of crypto assets, although not at this stage NFTs, one wonders whether the Board’s proposals will eventually lead to all forms of crypto assets coming within the regulatory perimeter.”
3 October: Kim Kardashian Fined £1m For Crypto Promo
Kim Kardashian has been fined more than a million dollars for promoting a cryptocurrency on social media without making it clear she was being paid to do so.
The US Securities and Exchange Commission (SEC) has told the reality television personality she must pay $1.26 million – around £1.1 million – in penalties, interest and profits. She’ll also have to cooperate with an ongoing SEC investigation.
Ms Kardashian was paid $250,000 (£222,000) to promote EthereumMax’s EMAX tokens in May 2021. In an Instagram post to her 331 million followers, the star linked to EthereumMax’s website where visitors would find instructions on buying EMAX tokens.
According to US regulations, people who promote a crypto asset security must disclose the nature, source and amount of compensation involved. Failing to make it clear EthereumMax paid her to make the post is what drew the SEC’s ire.
The fine includes approximately £230,000 in disgorgement (proceeds), which represents her promotional payment, plus prejudgment interest, and an £891,000 penalty. The entertainer has also agreed to not promote any crypto asset securities for three years.
In a statement today, the commission said investors deserve to know whether publicity of a security like EMAX is unbiased.
SEC Chair Gary Gensler said: “This case is a reminder that, when celebrities or influencers endorse investment opportunities, including crypto asset securities, it doesn’t mean that those investment products are right for all investors.
“We encourage investors to consider an investment’s potential risks and opportunities in light of their own financial goals.”
Matt Smith, CEO at compliance technology and data analytics firm SteelEye, says this latest incident should be a wakeup call for regulators to start taking so-called ‘modern market manipulation’ seriously: “Kim Kardashian’s social media post is not the first time – and certainly won’t be the last – that a celebrity has been able to significantly influence the price of financial instruments by utilising the global reach of social media.
“The fact Kardashian has been charged for her promotion is certainly progress. Just as non-compliance in financial services carries high penalties, so should ‘modern market manipulation’ by social media, and it would appear that the SEC is making an example of Kardashian in the hope that it will bring other celebrities and influencers in line.
“But does this go far enough? Even if Kardashian would have alerted her followers that she was being paid for the post, it is likely that it still would have influenced thousands of people to invest.
“It seems clear to me that if we do not introduce more rigorous and clear regulations around social media usage, this type of online activity will only become more prolific.
“The finance sector is heavily regulated and there are stringent rules in place to prevent market manipulation, but there is a gaping hole in the framework as evidenced by this fine, and it is time for regulators to intervene before too much damage is done.”
13 July: Strong Regulation Will Foster Innovation To Avoid Future Crypto Winters
Sir John Cunliffe, deputy governor of the Bank of England with responsibility for financial stability, has warned of the need for greater regulation of the crypto market as a result of the current ‘crypto winter’, which has seen dramatic falls in the value of assets.
In a speech at the British High Commissioner’s Residence in Singapore, Sir John said: “In recent months we have seen a dramatic bout of instability and losses in crypto markets – dubbed by some commentators as the ‘crypto-winter’.
“A widespread collapse of crypto-asset valuations has cascaded through the crypto ecosystem and generated a number of high-profile firm failures. The totemic indicator of the crypto winter is that Bitcoin, the signature crypto asset, has lost 70% of its value since November.
“Regulators, of course, have not been slow to comment. And, true to type, I want to pull out four lessons I think we can draw from this episode:
- technology does not change the underlying risks in economics and finance;
- regulators should continue and accelerate their work to put in place effective regulation of the use of crypto technologies in finance;
- this regulation should be constructed on the iron principle of ‘same risk, same regulatory outcome’ ;
- crypto technologies offer the prospect of substantive innovation and improvement in finance. But to be successful and sustainable innovation has to happen within a framework in which risks are managed: people don’t fly for long in unsafe aeroplanes.”
Sir John said the success of crypto depends on effective regulation: “It would also be unwise for innovators and the authorities alike to forget that to be successful and sustainable, technologically-driven innovation needs regulation.
“A succession of crypto-winters will not, in the end, help the deployment and adoption of these technologies and the reaping of the benefits that they may offer. History also has examples of technologies that have been put aside/ shunned because of dramatic early failures. While the causes of the Hindenburg Zeppelin disaster are still debated, it is very probable that the general development of the use of hydrogen in transport was put aside for decades as a result.”
Commenting on the speech, Petr Kozyakov, CEO of payments firm Mercuryo, said: “It’s incredibly encouraging to see a leading Bank of England official acknowledging the importance of regulation in fostering innovation in crypto and acknowledging the great potential of this technology.
“We echo his sentiments – as does the wider public and business community. Two thirds (68%) of British people tell us they want to see cryptocurrency become more regulated, while 24% of UK firms that don’t currently use cryptocurrency cite a lack of regulatory clarity as a reason why.
“As more regulators and governments mobilise to introduce regulation I hope they ensure that industry leaders are part of the process. We want to be part of the solution to ensure the frameworks being explored work for everyone.
“Far from a Hindenburg disaster, we want to see crypto soar into orbit, with effective regulation the key to opening it up to even wider adoption and utility.”
11 July: Crypto Hawk Alder To Chair UK Financial Watchdog
The UK’s troubled financial watchdog has named a Hong Kong regulation veteran as its next chairman, writes Andrew Michael.
Ashley Alder will join the Financial Conduct Authority in January 2023 on a five-year term when he takes over from interim chair, Richard Lloyd.
Mr Alder’s appointment, decided by HM Treasury, was one of the first announcements made by Nadhim Zahawi, who became Chancellor of the Exchequer last week.
A lawyer by background, Mr Alder has run Hong Kong’s Securities and Futures Commission (SFC) for the past 11 years having initially joined the organisation as director of corporate finance.
During his time at the SFC, he helped introduce measures to strengthen the territory’s financial system, pushed for greater focus on climate finance, and imposed sizeable fines on banking giants.
Mr Alder’s appointment comes as the FCA attempts to reconfigure itself after criticism over its handling of recent scandals including the failure of Woodford Investment Management, as well as the collapse of mini-bond provider London Capital & Finance.
The FCA is responsible for authorising more than 50,000 financial firms. Its brief extends to ensuring that consumers are treated fairly and that markets run smoothly. It also has the powers to fine regulated companies and individuals and can bar miscreant bankers, brokers and advisers from conducting financial business.
As a regulator, Mr Alder is known for his hawkish stance on cryptocurrencies. These are likely to chime with the FCA’s current view, given that the regulator has issued multiple warnings to consumers in connection with cryptocurrenices over the past two years.
The FCA has multiple concerns about high-return investments based around cryptoassets. These include consumer protection, price volatility, product complexity, charges, and the way such products are promoted.
But earlier this year, the then Chancellor and now prospective Conservative Party leadership contender, Rishi Sunak, announced his intention to make the UK a global hub for cryptoasset technology and investment, potentially stoking tensions between the Treasury and the FCA, given the regulator’s stance.
However, the appointment of Mr Zahawi, another prospective Conservative Party leadership contender, as Chancellor has left questions about the direction of the UK’s crypto policy.
5 July: Crypto Ownership Numbers Double Year On Year
The number of UK adults that hold or have held cryptocurrencies has almost doubled since last year, according to new analysis, writes Mark Hooson.
HMRC and Kantar Public’s research found 10% of UK adults said they had ever held cryptocurrency. That figure is up from 5.7% in January 2021, based on Financial Conduct Authority (FCA) data.
Men were more likely to have held crypto than women (13% compared to 6%). Younger people were more likely to have held crypto than older cohorts, and people in ethnic minorities were more likely to have held crypto than white people.
Of those who held crypto assets when the research was conducted, 85% were aged 25-44 and 90% had annual incomes of more than £50,000.
Other noteworthy findings included:
- almost one in five (18%) had sold off their entire holdings
- 11% of those who held crypto assets had purchased stablecoins
- almost a third (30%) had invested less than £100
- more than half (52%) bought into cryptocurrency as a ‘fun investment’
- almost one in 10 (8%) invested in cryptocurrency to ‘gamble’
- more than 4 in 10 (43%) of holders had money saved in an ISA account
- most (63%) of crypto owners who sold assets said they made a profit
- 14% of sellers lost money and 14% broke even
- 24% made profits of £500 or less
- 3% lost more than £5,000.
5 July: EuroCoin Launched With Peg To Euro
A new stablecoin pegged to the euro (EUR) has been launched on the Ethereum blockchain, writes Mark Hooson.
EuroCoin (EUROC) is the first major euro stablecoin. The asset is backed by full reserves of the euro, meaning €1 is held in reserve for every EUROC issued. As a stablecoin, the value of one EUROC should remain at one EUR.
The stablecoin is live on a few exchanges, including BitPanda, Bitget and Huobi Global, and is expected to go live on Binance US, Bitstamp and FTX by mid-July.
EUROC’s issuer, Circle, expects it to launch on other blockchains by the end of the year.
Circle CEO and founder Jeremy Allaire said: “There is clear market demand for a digital currency denominated in euros, the world’s second most traded currency after the US dollar.
“With USDC (US dollar stablecoin) and EuroCoin, Circle is helping unlock a new era of fast, inexpensive, secure and interoperable value exchange worldwide.”
Even though stablecoins are meant to maintain their 1:1 pegging with the currency they’re associated with, market volatility in 2022 has seen some, such as Terra and Tether, lose their parity with the US dollar.
1 July: European Union Agrees Framework To Regulate Crypto
EU regulators will attempt to tame the “wild west” of the cryptocurrency market with a new regulatory framework agreed this week.
Under the Markets in Crypto-Assets (MiCA) initiative, crypto issuers and exchanges will have to follow new rules if they want to operate within the region.
The measures are intended to protect consumers. They include provision for asking stablecoin issuers (stablecoins are linked to fiat currencies such as $ and £) to have sufficient liquidity in their reserves to cope with mass withdrawals, as well as daily transaction limits on stablecoins that become too large.
The European Securities and Markets Authority (ESMA) will be able to ban or restrict platforms that fail to protect consumers.
Announcing the news, European Parliament lead negotiator Stefan Berger said: “Today, we put order in the Wild West of crypto assets and set clear rules for a harmonized market that will provide legal certainty for crypto asset issuers, guarantee equal rights for service providers and ensure high standards for consumers and investors”.
Since the UK is no longer an EU member, crypto issuers and exchanges operating in the UK won’t be subject to MiCA rules. As things stand, the cryptocurrency market is unregulated in the UK.
However, the government does have plans to bring stablecoins such as Tether into existing payments regulation in order to become a recognised form of payment.
Welcome step
Petr Kozyakov, CEO of payment services company Mercuryo, says the EU move is positive: “This provisional agreement by EU regulators to safeguard the crypto sector is a welcome step in the right direction.
“There is a real desire for a clear set of rules to protect individuals and businesses who have adopted cryptocurrencies already, to weed out bad actors, and to encourage others to adopt crypto as a result.”
Mercuryo research suggests there is strong appetite for crypto regulation in the UK. According to the firm’s data, 68% of British people say they want to see cryptocurrency become more regulated, while 61% worry about falling victim to a cryptocurrency scam, and 47% feel their money is safer in other forms of investment than in a cryptocurrency.
Mr Kozyakov says this sentiment is echoed by UK businesses: “Among those that do not use cryptocurrency, one in four cite a lack of regulatory clarity as a reason why while 37% say it is because they don’t understand cryptocurrency well enough.
“Another quarter are concerned about the risk of scams for their customers, mirroring consumers’ security concerns.”
The research suggests 64% of UK businesses are apprehensive about introducing or accepting cryptocurrency payments, despite 52% also recognising that it could increase the size of their customer base.
30 May: Luna 2.0 Sell-Offs Crash Price
Luna, the cryptocurrency that collapsed the Terra blockchain, has crashed in value after relaunching last week.
Investors in the original project were gifted ‘Luna 2.0’ tokens on Friday, 27 May, to compensate them for their losses following the original Terra’s collapse (see story below).
However, widespread sell-offs of those ‘airdropped’ tokens on Friday saw the asset drop from around $19.50 to around $6 this morning, representing a drop of almost 70%.
Investors who held more than $10,000 worth of Luna pre-collapse received a 30% reimbursement of the token last week, with the remaining 70% to be handed out over the next two years in a bid to reduce the impact of widespread sell-offs that could tank Luna’s value.
27 May: Luna Relaunches On New Blockchain
The Luna cryptocurrency is relaunching on a new blockchain, two weeks after its involvement in the collapse of the Terra blockchain.
The original Terra blockchain had two tokens, luna and stablecoin terraUSD (UST). Luna played a part in pegging UST to the US Dollar, but when UST lost its 1:1 pegging with the US fiat currency, the Terra algorithm began issuing more luna coins to rebalance the system. The hyperinflation caused luna to lose nearly all its value.
In what’s known as a ‘hard fork’, the new Terra chain will separate from the old Terra Classic chain. Terra’s native token will be luna, while Terra’s Classic’s will be luna classic.
Referred to as Terra 2.0 by the project’s creators, the new project will cast off the terraUSD (UST) stablecoin.
Previous luna and UST holders will receive new tokens via airdrop today (Friday 27 May). Those with more than 10,000 tokens will receive 30% now and the remaining 70% over two years to prevent another crash caused by sell-offs.
17 May: Emirates To Allow Air Travellers To Pay With Bitcoin
Emirates, the United Arab Emirates flag carrier, is adding Bitcoin as a payment option and launching non-fungible tokens (NFTs) as part of a drive to build “signature brand experiences.”
The airline will incorporate digital solutions such as those underpinning cryptocurrencies and the blockchain as part of its strategy to improve customer service.
Cryptocurrencies are a digital means of exchange which use cryptography to make transactions secure. Blockchain is the database technology at the heart of nearly all cryptocurrencies.
Headquartered in Dubai, Emirates says it will recruit staff to create NFT collectibles that will be tradable on its website. NFTs are digital assets that provide the owner with unique online versions of artwork, music and video.
The company has not said when the new features would be available.
The airline introduced virtual reality technology on its website and the Emirates app more than five years ago, providing three-dimensional, 360-degree view experiences of its onboard cabin interiors.
25 April: Fidelity To Allow Workers To Bet Retirement On Bitcoin
Investment giant Fidelity Investments is planning to give US workers the option of adding cryptocurrency into the asset mix of their retirement savings plans.
US 401(k) retirement accounts typically feature asset classes such as stocks and shares, bonds and cash.
The move by Fidelity, as reported by the Wall Street Journal, to offer workplace investors the option of adding Bitcoin to their savings accounts, would be a first. Cryptocurrency remains controversial because of its huge volatility and the possibility of incurring significant losses.
The crypto option will be available to the 23,000 employers that use Fidelity to administer their retirement accounts by the summer. With around £8.5 trillion in assets under administration, the fund manager is the largest retirement plan provider in the US.
Fidelity said there is growing interest from retirement plan sponsors for vehicles that allow them to provide their workers with access to digital assets in defined contribution pension plans.
Such plans enable workers to build up a savings pot from which a pension is eventually drawn.
Despite the apparent enthusiasm to incorporate crypto into retirement planning arrangements, US regulators have urged caution against accommodating digital assets within 401 (k) arrangements.
Last month, the Department of Labor urged plan sponsors to exercise “extreme care” before they considered adding a cryptocurrency option into the investment menu of their retirement accounts.
The warnings echo the stance taken by the UK financial regulator, the Financial Conduct Authority (FCA), in relation to crypto assets.
The FCA frequently warns consumers about the volatile nature of the crypto market, reminding would-be investors that crypto assets in the UK are unregulated, high risk and offer nothing in the way of financial protection if things go wrong.
7 April: Meta Mulls In-App ‘Zuck Bucks’ Currency
Meta, the social media giant formerly known as Facebook, is considering introducing an in-app currency. The tokens have been dubbed ‘Zuck Bucks’ by company insiders, referencing Facebook founder Mark Zuckerberg.
Unlike a cryptocurrency, Zuck Bucks would have no value outside of the Meta app-sphere, making them comparable to those found in mobile games such as Roblox’s ‘robux’.
Such currencies have garnered media coverage because children have used their parents’ payment details to buy hundreds of pounds-worth of tokens.
The in-app currency development follows February’s winding down of the Facebook-funded Diem stablecoin cryptocurrency, following regulatory challenges.
Speaking at the South By Southwest conference last month, Mr Zuckerberg signalled that Meta has not given up on blockchain technology, telling reporters that non-fungible tokens (NFTs) would soon be coming to its platforms.
4 April: Chancellor Tells Royal Mint To Create NFT
Chancellor of the Exchequer Rishi Sunak MP has told the UK’s producer of notes and coins to create a non-fungible token (NFT) as part of a move to mark the UK’s forward-looking approach to the cryptocurrency industry.
NFTs are digital assets that represent real-world objects, such as unique works of art or mementoes of memorable sporting moments. NFTs, along with cryptocurrencies such as Bitcoin, use blockchain, a multi-point computer ledger designed to safely store digital data.
Speaking today at the Innovate Finance Global Summit, John Glen, economic secretary to the Treasury, announced that Mr Sunak has asked the Royal Mint to release an NFT this summer.
No details were given of what image or object the NFT might represent, nor whether NFTs would be used to generate funds for the exchequer.
Mr Glen said the announcement was one of a series of measures to make the UK a “global hub for cryptoasset technology and investment.”
Other measures announced by Mr Glen included:
- stablecoins, a cryptocurrency designed to have a relatively stable price by being pegged to a currency or commodity, to be regulated, paving the way for their use in the UK as a recognised form of payment
- legislation for a ‘financial market infrastructure sandbox’ by 2023, enabling firms to explore the “potentially transformative benefits of distributed ledger technology”
- a two-day ‘Crypto Sprint’ led by the City watchdog, the Financial Conduct Authority (FCA), in May seeking the financial services industry’s views on key issues relating to the development of a future cryptoasset regime
- establishing a Cryptoasset Engagement Group to work with the financial services industry
- looking at ways to improve the competitiveness of the UK’s tax system to encourage further development of the cryptoasset market.
Today’s announcement to launch an NFT at a time when the UK is in the grip of a cost-of-living crisis may raise eyebrows. Following his recent Spring Statement, Mr Sunak came under pressure from all sides of the political divide for not doing more to help the UK’s increasingly hard-pressed households.
News that May’s Crypto Sprint will be led by the FCA also has the potential to stoke tensions between the Treasury and the UK’s main financial regulator about future plans for the crypto industry.
The FCA issues regular warnings to consumers about the crypto industry, reminding them that cryptoassets are unregulated and high-risk.
The FCA’s current stance on crypto as an investment is that investors “are very unlikely to have any protection if things go wrong, so people should be prepared to lose all their money if they choose to invest in them”.
30 March: Watchdog Extends Deadline For Selected Crypto Firms
The Financial Conduct Authority (FCA), the UK’s financial regulator, has extended a short-term licensing arrangement for several cryptocurrency firms, providing them with more time to get their affairs in order.
The FCA had previously announced that crypto companies operating without permanent licences by 1 April 2022 would be made to stop their UK operations.
Crypto firms operating in the UK are required to register with the FCA under anti-money laundering regulations. So far, 33 firms have been added to the regulator’s list of registered cryptoasset organisations.
But the regulator has now said that a dozen firms on its temporary register of cryptoasset businesses will be given additional time providing that they can show they need it.
The FCA’s Temporary Registration Regime for cryptoasset businesses was set up in December 2020. This allowed existing cryptoasset firms, whose applications had yet to be assessed by the regulator, to continue trading providing they had applied to register before 16 December of that year.
The FCA’s temporary register shows that two of the 12 firms now offered extensions include payments and banking app Revolut and Copper, a business that helps financial institutions trade cryptocurrencies.
Crypto firms on the temporary list will be given extra time if they supply more information for their application. According to the FCA: “This is necessary where a firm may be pursuing an appeal or may have particular winding-down circumstances”.
Earlier this year, a House of Commons Treasury Select Committee report criticised the FCA for the amount of time it had taken to deal with applications and recommended that the 1 April deadline should not be extended.
The regulator issues regular warnings to consumers about the crypto industry. It reminds would-be traders that cryptoassets are unregulated and high-risk, which means people are “very unlikely to have any protection if things go wrong, so people should be prepared to lose all their money if they choose to invest in them”.
The FCA’s Financial Services Register includes a list of unregistered cryptoasset businesses. According to the FCA, these “are UK businesses that appear to be carrying on cryptoasset activity that are not registered with the FCA for anti-money laundering purposes”.
Earlier this March, the FCA said it had opened more than 300 cases on unregistered crypto firms in the past six months “many of which could be scams”.
22 March: Advertising watchdog warns 50 firms over crypto ads
The UK’s advertising regulator has issued an enforcement notice to more than 50 companies promoting cryptocurrencies, setting out its standards for ads and including warnings against encouraging investors to buy through fear of missing out.
The Advertising Standards Authority (ASA) says it issued the notice as part of an ongoing clampdown on “problem” cryptocurrency ads and to ensure that consumers are treated fairly in this area of the financial marketplace.
As part of the notice, ASA provides guidance on how the crypto industry should keep to the rules when promoting its products.
ASA says advertisers should state clearly that cryptocurrencies are unregulated in the UK and that the value of holdings can go down as well as up.
It adds that promotions must not imply that cryptocurrency decisions are trivial, simple, or suitable for anyone, nor must they imply a sense of urgency to buy or create a fear of missing out.
The guidance extends to ads in the press, on TV, via email, outdoor posters, in promoted social media posts and via paid agreements with influencers.
ASA will continue to monitor the situation and warns that it will take “targeted enforcement action to ensure a level playing field” if problem ads persisted after 2 May.
Earlier this year, the government said new rules on cryptocurrency advertising, overseen by City watchdog the Financial Conduct Authority (FCA), would be introduced bringing them into line with traditional financial promotions.
Guy Parker, the ASA’s chief executive, said: “Crypto has exploded in popularity in recent years. We’re concerned that people might be enticed by ads into investing money they can’t afford to lose, without understanding the risks. Working alongside the FCA, we’ll take strong action against any advertiser who fails to ensure that their ads are responsible.”
Sarah Pritchard, executive director of markets at the FCA, said: “People should be wary of any promotion promising high investment returns and do further research before investing, including through the FCA’s InvestSmart website.
“Crypto assets remain unregulated and those who invest in them should be prepared to lose all their money.”
11 March: FCA Demands Closure Of Crypto ATMs
Watchdog the Financial Conduct Authority (FCA) has told cryptoasset firms to close any automatic teller machines (ATMs) offering crypto services in the UK.
ATMs offering cryptoasset exchange services in the UK must be registered with the FCA and must comply with UK Money Laundering Regulations (MLR).
The regulator says none of the cryptoasset firms registered with it have been approved to offer crypto ATM services. This means that any of them operating in the UK are doing so illegally and consumers should not be using them.
The FCA is contacting operators of crypto ATM machines in the UK to tell them that the machines be shut down or the operators will face further action.
The regulator issues regular warnings to consumers that cryptoassets are unregulated and high-risk, which means people “are very unlikely to have any protection if things go wrong, so people should be prepared to lose all their money if they choose to invest in them.”
4 March: Man City Signs Crypto Deal With OKX
Premier League champions Manchester City have signed a multi-year deal with cryptocurrency exchange OKX.
The partnership, OKX’s first move into football sponsorship, will give the exchange an in-stadium presence at the club’s Ethiad stadium. The deal covers the men’s and women’s teams, as well as City’s e-sports operations.
Seychelles-based OKX claims to be the second largest cryptocurrency exchange with 20 million users worldwide. As part of the deal, it said it would be collaborating with City “to explore future innovation projects together”.
Sponsorship deals between football clubs and the cryptocurrency industry have become a regular occurrence in recent months.
The Bitget exchange recently announced tie-ups with both the Turkish side Galatasaray and the Italian club Juventus. See story from 17 February below.
17 February: Galatasaray Deal Highlights Sport’s Growing Links To Crypto Sector
Turkish football team Galatasaray has partnered with a cryptocurrency exchange in a brand-building initiative aimed at introducing fans to the crypto sector.
The sponsorship deal, brokered by Capital Sports Media Group, will feature the Bitget exchange as Galatasaray’s official partner on multiple platforms and media assets across both the club’s football and basketball teams.
The announcement is the latest commercial deal involving football and the cryptocurrency industry. It follows Bitget’s recent association with Italian side Juventus.
Earlier this month, Polish team Legia Warsaw revealed a tie-up with sport and entertainment agency Capital Block, to explore how to market Non-Fungible Tokens (NFTs) – a form of digital collectible – to its fan base.
Last October, Capital Block, the NFT division of Capital Media, advised Galatasaray on its first NFT release, featuring Ali Sami Yen, the club’s founder, which sold out in less than a minute.
Sandra Lou, CEO of Bitget, said: “Turkey has demonstrated significant interest in the crypto sector and we look forward to growing our community in this market as we continue to lead educational and knowledge sharing opportunities within the space.”
Tim Mangnall, CEO of Capital Block, said: “We have been working with Galatasaray for a while now and we know how committed the club is to being aligned with the most modern and revolutionary technologies out there.”
