UK Financial Watchdog CEO Says No Compensation To Investors For Crypto Losses

FILE PHOTO: Nikhil Rathi, then CEO of the UK Division of the London Stock Exchange, arrives at 10 Downing Street in London, Britain January 11, 2018. He is now chief executive officer. of the UK’s Financial Conduct Authority. REUTERS / Peter Nicholls / File photo

December 8, 2021

By Huw Jones

LONDON (Reuters) – Lost crypto-related investments will not be eligible for compensation schemes as the sector could help spread serious crime, Britain’s Financial Conduct Authority said on Wednesday.

FCA CEO Nikhil Rathi said it was necessary to “draw some pretty clear lines” around the Financial Services Compensation Plan when it comes to individual investors in cryptocurrencies.

“They are a mediator for serious organized crime and money laundering and anyone who invests in them must be willing to lose all their money,” Rathi told the Congressional Treasury Select Committee.

“I suggest we simply say that anything crypto-related is not entitled to compensation, that consumers should be clear about that when they invest,” Rathi said.

Investors are sometimes legally eligible for compensation if they lose money to a financial company that broke the rules or committed serious errors.

The FCA has seen an increase in the number of applications from crypto exchanges, but Rathi said many applications are “below par,” resulting in high percentages of withdrawals or rejections.

Rathi acknowledged lawmakers’ concerns about financial firms’ authorization backlogs and said 100 staff were being recruited, along with a bid to find more staff with scarce skills. about electronic money.

He warned financial firms seeking permission that they would face closer scrutiny. This follows criticism from the watchdog in a report on illegal handling of London Capital & Finance, which said the FCA needs to be more demanding when it comes to licensing and inspections. financial resilience of the applicant.

“We are in a world where we are putting more effort into the system,” says Rathi.

He defended internal reform on pay and bonuses, which will result in some employees being paid less next year as wages for the lowest paid employees increase.

Rathi took power a year ago and is pushing for internal changes to create a more active watchdog to protect consumers as scams increase.

One lawmaker questioned why the FCA paid nearly half a million pounds to an outside media company during the transition period.

“We are going through profound and widespread change,” Rathi replied.

(Reporting by Huw Jones in London, Editing by Iain Withers and Matthew Lewis)