TLDR
- The UK Financial Conduct Authority (FCA) is lacking staff in its crypto asset policy team.
- There are only 18 policy staff out of the 109 total staff dedicated to crypto assets at the FCA.
- The new UK government is facing challenges in regulating the crypto sector effectively.
- Experts suggest creating a new regulatory body solely for digital assets.
- There is a shortage of resources in crypto asset wholesale policy within the FCA.
The UK’s Financial Conduct Authority (FCA) is currently experiencing a significant shortage of staff in its crypto asset policy team, which could potentially hinder the country’s ability to regulate the rapidly evolving digital asset sector effectively.
This information was revealed through data obtained by Quant, a blockchain for finance provider, through a Freedom of Information (FOI) request.
According to the data from the FOI request, while the FCA now has over 100 staff members working on crypto assets, only 18 are dedicated to policy, which is responsible for drafting and implementing market regulations.
This staffing shortage in key policy areas may pose challenges for the new UK government’s intentions to adopt digital assets and tokenization.
The total number of FCA staff focusing on crypto assets has increased from 9 in 2019 to 109 in 2024, reflecting the growing significance of digital assets in the financial sector.
However, there seems to be a distribution imbalance among these staff members, with a majority split between authorization (31) and supervision (31), while policy lags behind despite recent growth from 11 staff in 2023 to 18 in 2024.
Gilbert Verdian, Founder and CEO of Quant, highlighted the necessity for a new regulatory approach:
“There is now a widespread understanding that the unregulated crypto experiment has not been successful. However, digital assets and tokenization can enhance many areas within financial services. The challenge lies in the UK lacking an entity that can drive responsible and innovative regulation to govern all of this.”
The data also reveals a shortage in crypto asset wholesale policy, with only 9 employees in this domain, which could be a critical weakness as digital assets gain more prominence in wholesale capital markets.
The Labour Party, currently in power, has committed to “embracing securities tokenization and a central bank digital currency,” making this a focal point.
Verdian proposes a bold solution to tackle these regulatory hurdles: “A separate ‘Digital Finance Agency’ dedicated entirely to digital assets can lead the way in shaping the future of finance.”
He suggests that such an entity could offer the necessary attention and resources to develop an agile and effective regulatory framework for digital assets.
The lack of staff at the FCA is a critical issue at a crucial moment for the UK’s financial sector. The new government has pledged to “streamline the regulatory rulebook” under its Financial Services Plan.
Nevertheless, without adequate resources and expertise in digital asset regulation, the UK risks falling behind other jurisdictions and potentially losing crypto companies to more accommodating regulatory environments.
Tokenization, in particular, presents a significant opportunity for the UK to modernize its financial infrastructure.
“Tokenization provides a means to future-proof our financial services infrastructure for the next three decades, positioning our banking, payments, and capital markets at the forefront of technological innovation,” Verdian elaborates.
However, realizing this potential on a large scale necessitates a robust and well-equipped regulatory approach.
The FCA has acknowledged that, in addition to its specialized crypto asset teams, it has colleagues across the organization who also work on crypto assets alongside other sectors.
Nonetheless, the question remains whether this scattered approach can provide the focused expertise required to navigate the intricate and rapidly changing realm of digital assets.
Hot Take
It’s evident that the UK’s Financial Conduct Authority is facing a staffing shortage in its crypto asset policy team, which could hinder effective regulation of the rapidly evolving digital asset sector. The need for a dedicated regulatory body for digital assets is crucial to stay ahead in shaping the future of finance. Without adequate resources and expertise, the UK risks falling behind in the global crypto landscape. Tokenization offers significant opportunities for modernization, but a robust regulatory framework is essential to realize its full potential.
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