Watchdog asks for crypto industry feedback on UK investment reforms

The UK’s Financial Conduct Authority (FCA), the watchdog overseeing the country’s financial sector, has released proposals as part of its strategy to “boost UK investment culture,” and is asking for help from the crypto industry.

In discussion and consultation papers released on Monday, the FCA asked crypto companies to provide feedback on proposals aimed at “expanding consumer access to investments” and amending rules for “client categorization and conflicts of interest.”

The discussion paper noted that “virtually all of the underperformance on high [digital engagement practices] apps could be attributed to trading in cryptoassets and [contracts for difference.” The proposal highlighted potential risks for consumers using “cryptoasset proxies” without investment limits, warnings, or “appropriateness tests.”

In its consultation paper, the UK watchdog proposed:

“We will also add guidance that a personal investment history mainly in speculative high risk or leveraged products or crypto assets is not usually an indicator of professional capability, unless there is strong evidence that the client meets the threshold of a professional client from other Relevant Factors, including the client’s ability to bear potential losses.”

According to the watchdog, the proposed changes would streamline the FCA’s existing guidelines and were part of a strategy to potentially “remove some arbitrary tests and give firms more responsibility to get it right.”

Companies that advised clients on or sold digital assets were asked to provide responses to the recommendations by February and March.

Related: Crypto investor gives Reform UK record $12M in election donation

Slow and steady advances toward policies that favor cryptocurrency

The UK has been a significant hub for crypto companies doing business outside the United States, which, until the about-face on regulation and enforcement under US President Donald Trump, many industry leaders said that they considered an uncertain regulatory environment.

In December, the UK government passed a law treating digital assets as property, improving clarity on cryptocurrencies like Bitcoin (BTC) in cases such as the recovery of stolen goods or insolvency.

With the market steadily growing in the country, the government was reportedly considering a ban on crypto donations to political parties.

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