The Financial Conduct Authority (FCA) in the United Kingdom is looking to strike a balance between traditional finance (TradFi) and decentralized finance (DeFi) when it comes to regulating cryptocurrencies like Bitcoin (BTC). Matthew Long, the FCA’s director of payments and digital assets, believes that combining different approaches is the key to effective regulation. He stated at a panel discussion at the FT Crypto and Digital Assets Summit that the goal is to take the best aspects of traditional finance and understand the nuances of the current system. Long emphasized that the FCA aims to apply the same risk and regulation to cryptocurrencies without reinventing the wheel. He acknowledged that some issues that seemed straightforward turned out to be complex, while others that were expected to face opposition ended up being successful.
Long also discussed the potential harm in both centralized finance (CeFi) and DeFi, noting that many authorities already have tools to combat money laundering in CeFi. The FCA is focused on finding ways to maintain reputable actors in the crypto industry while improving its integrity and security.
The UK has become a significant player in the crypto economy, attracting attention from the FCA. Since 2020, the authority has approved the registrations of 38 crypto firms out of 300 applications. The FCA is actively working on enhancing its capabilities to detect and combat crypto market abuse and prevent illegal crypto advertisements.
Overall, the FCA aims to strike a balance between traditional and decentralized finance in order to regulate cryptocurrencies effectively and ensure a cleaner and safer industry.