The Financial Conduct Authority (FCA) has significantly expanded its cryptocurrency workforce to over 100 staff members, yet its policy team remains understaffed, according to data obtained by blockchain finance provider Quant through a Freedom of Information request. The regulator claims that it is doing everything in its power to support the cryptocurrency industry, with members of the other FCA teams also working on the approach to digital assets.
FCA Crypto Staff Surges, But Policy Team Lags Behind
The FCA now employs 109 staff dedicated to crypto assets, a huge increase from just 9 in 2019. However, only 18 of these employees work in the policy department, responsible for drafting and implementing market regulations. Adding nine representatives from the wholesale policy department, the total increases to 27, accounting for about 25% of the overall employment.
The data reveals that most of the FCA's crypto workforce is split between authorization (31 staff members) and supervision (31 staff members). They focus on granting regulatory permissions and monitoring compliance respectively. Even though the policy team has grown from 11 members in 2023 to 18 in 2024, it still lags behind other departments.
“There is now widespread recognition that the unregulated crypto experiment has failed,” said Gilbert Verdian, Founder and CEO of Quant. “But digital assets and tokenization improve many areas within financial services. The issue is that the UK lacks a body which can drive forward responsible and innovative regulation to govern all of this.”
The findings come as the new Labour government has pledged to “streamline the regulatory rulebook” under its Plan for Financial Services. This commitment puts pressure on the ruling officials to provide clearer regulatory guidance for the crypto sector or risk losing firms to other jurisdictions.
“Properly regulated crypto assets have the potential to transform our economy and the financial services sector,” Tulip Siddiq, the new City Minister, previously commented. Quant argues, however, that if only 18 employees are responsible for creating cryptocurrency regulations, the UK could face a “crypto catastrophe.”
What is the FCA's opinion on the matter? In an email sent to Finance Magnates, a spokesperson for the regulator stated, "Crypto is an area of work that spans the entire FCA, and our increased staffing levels reflect our investment in these priorities."
"We’re making sure crypto companies have the right protections against financial crime, supporting innovative crypto firms via our Innovation Hub, and working with government and industry to design the future regulatory regime for cryptoassets," the spokeperson added.
FCA Needs “Digital Finance Agency”
Notably, the data also highlights a significant resource gap in crypto asset wholesale policy, with only 9 employees in this crucial area. This shortage could pose challenges to Labour's stated goal of “embracing securities tokenizationand a central bank digital currency.”
Verdian suggests a potential solution: “A separate 'Digital Finance Agency' dedicated entirely to digital assets can help the UK stay ahead of the pack when it comes to the future of finance.”
“Digital assets can bring major efficiency benefits to wholesale financial markets and to realise this potential at scale, we need a new regulatory approach,” Quant’s CEO concluded.
However, the FCA emphasized that beyond its dedicated crypto teams, it employs specialists across the organization who work on crypto assets alongside other sectors. Moreover, the regulator told Finance Magnates that it is also "actively supporting innovative firms that are using crypto and its underlying technology for the potential benefit of consumers, markets, and regulated firms." For example, as of April 2024, the FCA supports 58 firms with DLT-based innovations within the Regulatory Sandbox and 81 through Innovation Pathways.
In February, the UK government announced its intention to implement the much-anticipated cryptocurrency regulations over the next six months. Subsequently, in April, Economic Secretary Bim Afolami predicted that these regulations would be introduced by June or July. However, the industry is still awaiting their implementation. This development follows the passing of the Financial Services and Markets Act in June 2023, which classified cryptocurrencies as regulated financial activities.
The article was updated on Thursday, July 18, and supplemented with comments provided by the FCA.
This article was written by Damian Chmiel at www.financemagnates.com.
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