In a matter of days, we’ve watched as Elon Musk’s sharp turnaround Tesla announcement took the markets by storm. A tweet by Musk voicing Tesla’s environmental concerns surrounding Bitcoin sent the price of the cryptocoin tumbling. A tweet soon thereafter then led to the total value of Dogecoin to soar by more than $10 billion in just under 15 minutes.
It’s no secret that the coronavirus crisis has accelerated the growth in the retail cryptocurrency market to new heights. Yet whilst it continues to shore up its position as a major asset class with a notional value of $2 trillion as of April 2021, numerous questions still remain around regulation given how notably it lacks the interface to exist in tandem with conventional financial infrastructure.
A current picture of the UK’s Financial Conduct Authority (FCA) regulation and cryptocurrency exchanges is a patchwork at best and, in some cases, completely absent. While registration of exchanges may give investors some comfort, the focus of regulation in the UK is generally only anti-money laundering (AML) and due diligence measures – not trading.
Against the backdrop of exchanges proudly advertising their authorisation as a signal of legitimacy, the consequences could be severe when there is little by way of a wider framework governing exchange platforms’ activities.
The FCA’s evolving approach to crypto has often appeared conflicted with its plans to empower the UK’s status as a fintech powerhouse. Earlier this year, nearly 100 cryptocurrency companies faced regulatory limbo following the FCA’s decision to ban exchanges not on its official register. To accompany this move, the FCA released a warning to consumers that they should be prepared to lose all their money.
This was by no means the first such drastic action taken by the FCA, having previously banned the sale of crypto asset derivatives to retail investors. For cryptocurrency businesses acting lawfully these statistics will be encouraging – they want bad actors pushed out. The FCA’s crackdown on businesses operating on its regulatory perimeter will instil a degree of confidence that products reaching consumers are less likely to be scams.
The speed at which regulation and legislation needs to move to keep at pace with the crypto market is currently an unequal race. As cryptocurrencies across the board continue to turn last week’s losses into this week’s gains, the FCA will need to move faster to increase its cooperation with legitimate firms to create secure ground for the extraordinary influx of retail investors into the market.
Here, we’ve taken a look at four cryptocurrency exchanges who are currently frontrunners in their status with the FCA.
San-Francisco start-up Coinbase, a platform that allows users to buy, sell, exchange and hold cryptocurrencies like Bitcoin and Ethereum, continues to be undoubtedly one of the most widely known and used cryptocurrency exchanges worldwide. The company is valued at approximately $47 billion and has more than 56 million verified users across 100 countries.
In 2018, Coinbase, seeking to ramp up its British arm, was granted an e-money license from the FCA. Coinbase’s e-money license covers the firm’s fiat operations, or money moving in and out of Coinbase and between users. Through the license, the company has been enabled to make transacting in virtual currencies more straightforward for Coinbase’s customers.
Based in London, CEX.IO is a global crypto exchange supporting traders in more than 99% of countries worldwide. The exchange also provides access to Bitcoin and more than 80 other crypto assets. CEX.IO is carving itself in the market as a Coinbase alternative and a “guide to the world of an open financial system.”
In 2020, the FCA granted a license to Decent Finance Limited, a subsidiary of CEX.IO Group, allowing it to carry out electronic money activities in the UK. It obtained the status of an authorized electronic money institution (AEMI) under the FCA. The entity as a result is now able to issue electronic money and open segregated accounts for storing customers’ funds. The digital asset exchange continues to make inroads into solidifying themselves as a regulated brokerage service in compliance with both the FCA and EU’s MiFID II.
eToro is an all-in-one trading platform that allows users to dabble in currencies, commodities, stocks, and cryptocurrencies. Based in Israel, eToro boasts of millions of clients in over 100 countries. The platform first introduced Bitcoin trading in 2013, but has since become a more well-rounded exchange that offers various cryptocurrency products. In the UK, eToro (UK) Ltd. is authorised by the FCA.
Gemini is a New York-based firm and regulated cryptocurrency exchange that is available in the UK. Founded by the Winklevoss twins, the exchange has grown rapidly to become a popular choice for individuals, traders and institutions to buy, sell, and store Bitcoin and cryptocurrency.
Gemini secured the Financial Conduct Authority’s (FCA) license to offer digital currency exchange services in the United Kingdom in 2020. It also was one of the first in the industry to receive the license ahead of the initial January 2021 registration deadline. UK-based institutional investors can now access the Gemini platform in their local currency, enabling them to access crypto trading, market data, and custody services for their clients. Gemini also operates its services for retail investors.
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