UK's top financial watchdog wants to bar investors from accessing government compensation in the event of crypto scams or not-at-fault financial loss.
On Wednesday, Nikhil Rathi, CEO of the United Kingdom's Financial Conduct Authority, or FCA, issued the following statement to the Treasury Committee when asked about the risks of the much-unregulated cryptocurrency sector in the country:
When we talk about the compensation scheme, we have to draw some pretty clear lines. I would suggest anything is crypto-related should not be entitled to compensations, and consumers should be clear about that when investing.
In the passage, Rathi refers to the FCA's Financial Services Compensation Scheme, or FSCS, which pays out compensation to consumers when certain authorized financial institutions cannot meet claims against them, such as during bankruptcies, criminal schemes or insurance breach-of-contract. In theory, the proposed rules would prevent U.K. government from paying restitution to crypto investors who have been scammed by allegedly fraudulent cryptocurrency exchanges or decentralized finance rug pulls, as these types of investments are either unregulated or operate in legal grey areas. More than 717 million pounds were paid out to consumers this year by the FSCS in compensation for their financial loss.
Nikhil Rathi speaking at the Treasury Committee hearing | Source: parliamentlive.tv
"There are technologies underpinning cryptocurrencies, which, I think we would recognize, as having significant benefits and value, such as tackling financial crimes. A number of innovations, however, we have raised concerns around," said Rathi when asked about the country's regulatory framework. "Some of these crypto-assets, we don't believe have intrinsic value. They have been a part of a series of organized crimes and money laundering, and anyone who invests in them must be ready to lose all of their money."