A recurring theme when speaking to CCOs and MLROs at UK-based crypto-asset firms is that global regulators are not aligned when it comes to thinking around how best to regulate crypto-assets. Some are seen as leaning towards being very strict, some seek a middle path, some are consumer-focused others less so, and so it goes on. Central banks mirror this by being at different stages with their thinking around CBDC.
Falling foul of mass marketing regulations or client on-boarding protocols in different jurisdictions, are obvious examples of the cross-border risks to be managed by UK crypto-asset firms. Some UK crypto CCOs and MLROs have described experiencing an adversarial tone with regards to some of their dialogue with the FCA. A reason they have suggested for this is a lack of crypto-asset SMEs at the regulator. This looks about to change.
The SEC has a former MIT blockchain professor at its helm. Gary Gensler, the ex-CFTC Chair and one of the youngest ever to have made Partner at Goldman Sachs, has put the regulatory landscape for what he has described as the “wild west” crypto market, high on his to-do list at the SEC. “The legislative priority should centre on crypto trading, lending, and DeFi platforms” said Gensler last year. This should be good news for incumbent firms in the wider crypto-assets space who take seriously managing their regulatory compliance and less so for the bad actors. Fragmented federal and state regulation aside, the SEC would appear to be on the front foot regarding crypto SMEs within their ranks. Incumbent firms being able to pick-up the telephone to someone at the SEC who understands crypto-assets can only be a good thing to protect both the individual consumer and the institutional investor.
The FCA may perhaps not have an obvious ex-blockchain professor or a crypto Yoda in its senior leadership team right now, but they have just advertised for someone to lead and build their new Crypto Division. Increasing levels of crypto crime in the UK (and indeed wider digital-assets crime) has seen the FCA recently announce its opening of 300 cases looking into unregulated crypto activity. This new and key appointment will have got the attention of many in the growing Compliance and Financial Crime teams across the UK’s crypto-asset universe. For these firms themselves, let alone a regulator, it can be quite challenging to find the desired blend of regulatory compliance and crypto-assets knowledge sought for a senior manager-level hire. There will likely be some interest in the FCA’s new crypto lead role and if the total compensation is competitive. Tackling crypto global regulatory alignment is to be expected in their in-tray.
At Eiger Regulatory Partners we work with our clients to provide specialist regulatory consulting advice and human capital to minimise their risks and assist with strategy.
This article has been prepared for general guidance and educational purposes on matters of interest only and does not constitute regulatory advice. You should not act upon the information contained in this document without professional advice. Copyright Eiger Regulatory Partners 2022.