UK Crypto Firms Might Come under Prudential Rules as FCA Designs Policy

The UK Financial Conduct Authority (FCA) in its latest annual report for the year ended March 31, 2023, said it has continued to design prudential requirements for firms that are carrying out activities involving crypto assets. However, the British watchdog noted that it will only initiate public consultation on the rules after it gets backing from the government and lawmakers.

Learn about our progress and key achievements in the first year of our 3-year strategy. #FinancialServices #ConsumerDuty https://t.co/0HIEV7Ip3v pic.twitter.com/iOUNg7vZa0

New Prudential Regime Marks the First Year

Prudential requirements are rules that are designed to ensure the financial stability of establishments in a country's financial markets. These requirements typically focus on capital adequacy, liquidity, and risk management.

In January last year, the Investment Firms Prudential Regime (IFPR), the FCA's new prudential requirements for investment firms regulated under the Markets in Financial Instruments Directive (MiFID) law, which the UK adopted after Brexit, came into force. Under the new regime, the FCA improved its prudential expectations to focus not only on the risks firms face but also on those they can pose to consumers and financial markets.

What changes lie ahead for #BIPRU firms? We examine the new #FCA prudential regime for #investmentfirms. Read the full client alert here: https://t.co/D4OiNaimTy #regulatorycompliance pic.twitter.com/3HDeAAGz8k

In the annual report released today (Friday), the FCA noted that the IFPR generated significant results during its first full year.

“We received new reporting from 3,500 firms providing a clearer, more objective understanding of their financial resilience,” the FCA stated. “We have reviewed the processes of 53 organisations across 17 groups, resulting in us advising firms to hold over £5 billion of capital requirements and over £8 billion of liquidity in aggregate.”

CFD Brokers and Prudential Requirements

Furthermore, the FCA during the recent fiscal year focused on reviewing compliance with its prudential requirements among other categories of firms, such as contracts for difference (CFD) providers, wealth managers, and payment services firms. This effort “resulted in an increase of £19.2 million in capital requirements and £208.7 million in liquidity requirements for these firms,” the FCA noted in the annual report.

In other related news, the British watchdog recently found 'gaps in surveillance' among CFD providers in the country. Specifically, the FCA discovered weak monitoring of market manipulation and abuse of non-equity asset classes among derivatives brokerages in the country.

Additionally, the regulator found that only 61% of CFD providers in the UK will fully comply with its Consumer Duty requirements for products and services open for sale and renewal by the time the deadline of July 31, 2023, elapses. The Duty sets higher and more precise standards of consumer protection across the European country’s financial services industry.

IBKR adds Taiwan stocks; multi-chart feature on Match-Trader; read today's news nuggets.