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FCA opened 52 investigations into cryptocurrency businesses in the last year

Published on 15 February 2021

The FCA opened 52 investigations into cryptocurrency businesses in the last year* , says RPC, the City-headquartered law firm. However, the law firm says that this is likely to be just the tip of the iceberg in terms of cryptocurrency related activity that breaches regulatory rules or is illegal.

Sam Tate, Partner and Head of White-Collar Crime at RPC, says it’s expected that the FCA’s lack of resources may be restricting the number of investigations the regulatory body is able to carry out.


Sam Tate says: “If the FCA has hit saturation point now and can only deal with 50-60 cryptocurrency cases a year, how many cases will have not been investigated after the current cryptocurrency frenzy subsides.”


“Cryptocurrencies are being advertised on the sides of buses and blanketed across social media. The Treasury needs to ensure that the FCA is able to keep up with that explosion of activity – be it mis-selling, pressure selling or outright fraud.”


The extreme volatility of cryptocurrencies makes them a high-risk asset for investors. Low levels of regulation in this relatively new market, as well as the relative ease with which fraudsters can set up bogus currencies, makes cryptocurrencies even more susceptible to fraud.


Examples of cryptocurrency scams include: fake bitcoin trading platforms or clones of legitimate authorised firms, Ponzi schemes and “new” cryptocurrencies which do not exist.


A ban by the FCA on the sale of derivatives based on cryptocurrencies to retail investors came into place on January 6. The FCA estimates that this ban will prevent £53m in losses by retail investors in crypto linked derivatives.


The FCA has been receiving an increasing number of calls to its consumer helpline about cryptocurrencies – receiving a total of 343 calls in October, almost twice the 176 calls it received six months earlier in April.


Non-registered crypto businesses were required to register with the regulator by January 10 2021. Businesses that have failed to meet this deadline will come under scrutiny by the FCA.


Adds Sam Tate: “The FCA’s own research show that retail investment in cryptos is no longer limited to young people willing to have a small gamble. Investment is increasing amongst an older demographic, many are doing it as part of their long-term savings plan and many think they are protected from the fall in value of the crypto-assets they hold. This seems a recipe for serious consumer damage and disappointment.”


FCA research shows that the age of crypto-investors is rising, with 22% of crypto-investors in the over 55 age group in 2020 up from 7% in the previous year. 17% are buying as part of their long-term investments (e.g. pension) and the FCA research found that 11% of crypto-investors incorrectly thought that they were protected if the value of cryptos fell.


*FCA, year-end June 30