The UK’s financial regulator plans to step up enforcement operations, part of a sweeping crackdown on what it calls “problem businesses” across the financial services spectrum.

The Financial Conduct Authority said on Thursday it will add 80 staff to pursue companies that fail to meet basic regulatory standards across all sectors, as it set out its strategy for the next three years. It will also draft new rules to cover crypto assets, including stablecoins, which are backed by traditional assets.

Crypto groups have criticized the regulator for what they see as an overly restrictive approach, and the government this week outlined its own plans to make the UK a center for digital finance. But the regulator’s cautious stance underscores its position that standards should not be compromised.

“Consumer and market risks must be appropriately mitigated. This may require additional regulation of crypto assets as the industry evolves,” the FCA said.

The Treasury said this week that it intends to bring stablecoins under the regulator’s mandate if they are used for payments. The FCA said it will consult later this year on the regulation of these tokens.

“Crypto assets have been an important priority for the regulator. That said, players in the crypto asset industry are unlikely to agree with this approach,” said Syedur Rahman, Partner at Rahman Ravelli Law Firm. “Stricter regulation could eradicate privacy [and] impair innovation.

The FCA said it supports innovations in financial services as long as they have “applications that are in the public interest”, noting that stablecoin payments could reduce fees and make transactions smoother.

Stablecoins have traditionally been used primarily to purchase other more volatile cryptocurrencies such as bitcoin, but issuers have increasingly pushed the currencies as tools for faster remittances and transfers.

The rapid growth of the stablecoin market – which has grown from a value of $7 billion to nearly $190 billion in two years according to cryptocurrency data site CoinGecko – has raised fears of its potential impact on politics. monetary and financial stability.

The Bank of England’s Financial Policy Committee warned last month that if a stablecoin becomes widely adopted for payments, fluctuations in its value could threaten wider financial markets and called for a regulatory framework to mitigate those risks. .

A group of top U.S. regulators and the Treasury secretary said legislation was “urgently needed” in a November report.

The lack of clarity around the reserves that back certain stablecoins is among the concerns of regulators. According to the latest information from market leader Tether certificateat the end of 2021, it still held a significant portion of its reserves in commercial paper, a form of short-term debt, of unknown provenance or nationality.

The FCA said it would ensure crypto companies comply with anti-money laundering regulations and promised to intervene “when companies harm consumers or market integrity.” He is expected to receive new powers to oversee promotions of digital assets.

“Crypto assets are currently only regulated in the UK for the purposes of money laundering, and we have no conduct or consumer protection powers over the industry,” said the regulator.

The government announced earlier this week that it would launch a consultation on a broader set of regulations for the digital asset market. Sarah Pritchard, executive director of markets at the FCA, said the regulator would “continue to work closely with the government ahead of its consultation” on developing rules for crypto business.

Video: What are stablecoins and how do they work?

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