Partner Mark Hastings comments on crypto asset regulation in Law360

The Treasury’s comprehensive new regulatory regime comes at a time when the government is seeking to tackle the ever present issue of fraud within the crypto sector.

Regulators must be cautious when approaching crypto regulation with the same strategy as traditional financial regulation. Cryptocurrency’s volatility and international nature presents significant risks that may not be present in more traditional asset classes.

Regulators will be keen to bring crypto firms under the watchful eye of the FCA, especially following recent statistics from the watchdog which found that 85% of crypto firms failed to meet minimum registration standards regarding anti-money laundering and counter-terrorist financing.

The Treasury may have considerable difficulty in stopping international fraudsters keen to exploit British investors, given the globalised nature of cryptocurrency and the complexity of many crypto scams. The collapse of FTX reportedly left 80,000 British users out of pocket, and regulators will be keen to restore public confidence via this new regulatory regime.