UK Financial Watchdog Reveals Ongoing Probe Into 50 Crypto Firms Amid Rise in Crypto Scams

The financial watchdog revealed that over a six month period it opened over 300 cases related to unregistered crypto asset businesses.

By Shomik Sen Bhattacharjee | Updated: 4 March 2022 15:55 IST

UK Financial Watchdog Reveals Ongoing Probe Into 50 Crypto Firms Amid Rise in Crypto Scams

Photo Credit: Unsplash/ Kanchanara

The crypto/ NFT space is under the scanner from regulators such as the FCA

Highlights

FCA received 16,400 queries about possible scams within six months
Crypto scam checks on FCA's ScamSmart tool rose by 49 percent
FCA is putting pressure on social platforms to curb crypto ads

UK's financial watchdog, the Financial Conduct Authority (FCA) claims to have 50 active investigations into cryptocurrency business operators, which also includes criminal probes. The regulator also revealed that within a period of six months, up until September 2021, it investigated 300 cases related to unregulated crypto asset businesses while adding that a number of those cases could be linked to fraudulent practices. The FCA also said it had received 16,400 queries about possible crypto scams — a 33 percent increase compared to the same period in 2020.

Over the mentioned six-month period ending in September last year, consumers reported 4,300 potential crypto scams on the FCA's ScamSmart website. The authority noted that this far exceeded the 1,600 reports for the next most common category of pension transfer fraud. According to FCA data, crypto scam checks on its ScamSmart tool rose by 49 percent over the six month period to September 2021.

"Consumers need to have confidence when making investment decisions and the data we've published today shows how prevalent scams can be. Before investing, check you know who you are really dealing with, check if they are authorised by the FCA and do your research to understand the risks that might be posed," said FCA markets executive director Sarah Pritchard in an announcement. The authority maintains a registry of roughly 250 firms that “appear to be carrying on crypto-asset activity that is not registered with the FCA for anti-money laundering purposes.”

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We're taking a more assertive approach to tackling harm in the consumer investments market, including stopping a quarter of new firms from entering the market https://t.co/luByUUCaYb
— Financial Conduct Authority (@TheFCA) March 3, 2022

While the FCA takes a limited role registering crypto firms for anti-money laundering purposes it lacks oversight of crypto assets. Unsuspecting consumers have been lured into investing into crypto tokens that are launched without being scrutinised.

The opaque nature of cryptocurrencies also makes it hard for regulators to use conventional enforcement measures and reduce the likelihood of consumer harm. The FCA has warned in the past (via Investment Week) that its existing toolkit is less effective at keeping the crypto market in check compared to traditional financial products.

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Senior investment and markets analyst at Hargreaves Lansdown, Susannah Streeter, said tools such as the watchdog's ScamSmart campaign should boost education around tactics used by fraudsters, and help protect consumers.

"Instead of just flashing the warning lights about the number of consumers being lured into risky crypto investments and scams, the financial watchdog is now getting a lot tougher on stopping suspect firms from entering the market," said Streeter, speaking to Reuters.

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