FCA investigations into cryptocurrency businesses jump 74% in 12 months

The number of live FCA investigations into cryptocurrency businesses has increased by 74% over the past year, according to Pinsent Masons.

The law firm noted that there were 87 ongoing investigations this September, compared to 50 in the same month last year.

Pinsent Masons said that the “huge fortunes” made by early investors in cryptocurrencies made private clients more susceptible to the sales pitch of fraudsters in this area. It was also easy for a fraudster to set up a cryptocurrency business and sell tokens, as they require almost no physical assets, it added.

The FCA estimated that individuals in the UK lost over £27m to cryptocurrency and forex investment scams in 2018/19. The regulator also published its Final Guidance on Crypto-assets this July, outlining which businesses fall within its remit and could be investigated.

Pinsent Masons pointed out that US regulators were taking a similarly hard-line on cryptocurrencies, with the SEC recently suing Canadian firm Kik Interactive for conducting an illegal $100m unregistered initial coin offering (ICO), and reaching a settlement with Russian firm ICO Rating over a potential breach of anti-touting laws. The North American Securities Administrators Association also secured more than $1bn in restitution from enforcement actions into ICOs in 2018.

“The rise in investigations reflects the FCA’s increasingly hands-on and no-nonsense approach to enforcing the law in the cryptocurrency market,” said Pinsent Masons partner David Heffron.

“For cryptocurrency businesses acting lawfully these statistics will be encouraging – they want bad actors pushed out. The FCA’s crackdown on businesses operating on its regulatory perimeter will instil a degree of confidence that products reaching consumers are less likely to be scams.”

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