Law360 quotes Charlotte Hill on the FCA's new crypto rules potentially paving the way for 'bad actors'

TheTreasury is reportedly drawing up a new crypto regulatory regime, under which cryptocurrentcy and digital asset companies will be required to meet a set of standards overseen by the Financial Conduct Authority (FCA).

The new legislation is set to come into force in 2027. Some commentators, however, are suggesting that the new regime could risk increasing consumers' exposure to fraud and malign state institutions, with the FCA 'powerless in practice' to do much to stop it'.

Charlotte Hill, Partner in our Financial Services Regulation & Funds team, speaks to Law360 and warns that illicit activity from certain companies overseas could arise either accidentially or intentionally under the new regime:

In practice, the FCA has struggled to stop illegal retail targeting from overseas crypto firms, and this does not magically disappear under a new regime.

Charlotte continues that the risk of fraud could now "become framed within the new regulatory regime" and that the danger is "not that the FCA is opening the door to fraud" but rather that it is "formalizing a risk it already struggles to police". 

Without strong enforcement and international cooperation, consumer harm may simply become more visible than less frequent.

Charlotte explains that the biggest danger comes not from well-known global exchanges, but from smaller, lightly-supervised overseas companies that use institutional access as a fig leaf, while retail harm continues in the background.

Read the full article in Law360 here (subscription required).