- New FCA rules require UK users to pass a mandatory test.
- Failing the test leads to account banning.
- UK users push back against the requirement.
Cryptocurrency regulation is a contentious issue worldwide, with regulators often accused of rushing governance without fully comprehending the complexities of the technology. A recent example was the rollout of IRS reporting requirements, which drew widespread criticism over the rules being nearly impossible to comply with.
The Financial Conduct Authority (FCA) is the latest government agency to attract such criticism, following the rollout of mandatory questionnaires that require passing to maintain centralized exchange (CEX) access. While the agency may argue that the questionnaires mitigate risk, some UK crypto users have deemed the test pointless.
FCA Seeks to Test Users
The FCA’s new regulations require all CEX users in the UK to complete two mandatory questionnaires by January 8 to continue trading. The first is a client categorization to determine risk tolerance and investing experience. The second is an “appropriateness assessment” quiz designed to assess the user’s grasp of crypto trading risks.
Users unable to adequately demonstrate an understanding of the volatility and complexity of cryptoassets through these questionnaires will be barred from holding CEX accounts. According to OKX, the FCA believes this will protect naive retail investors from taking on inappropriate risks, which is a stance that the exchange supports.
“We're happy to follow these regulations as they fully align with our long-held commitment to responsible trading. We see it as our duty, as one of the world's leading crypto exchanges by trading volume, to educate our customers about it,” stated OKX.
Despite the FCA’s intentions to safeguard vulnerable investors, some within the crypto community view the questionnaires as another example of regulatory overreach.
Crypto Community Push Back
Some within the crypto community took to social media to voice their concerns in response to the FCA’s new requirements. Bitcoin libertarian “banthebbc 𝕏” expressed an opinion on the pointless nature of the questionnaires, adding that the “Government are a bunch of time vampires and value thieves.”
Freddie New, the head of policy at Bitcoin Policy UK, slammed the test requirement because it exists due to an incorrect classification of cryptocurrency as a “restricted mass market investment” by the FCA.
One X user mentioned that it was “ridiculous” that Brits can freely gamble without FCA intervention, yet being CEX banned for failing the test means “you cant invest your own money.”
On the Flipside
- The threat of an account ban for failing the test encourages users to give false answers to the questions.
- Implementing a mandatory self-reported test may not mitigate investor risk in all cases.
- Risk assessment contradicts the ethos of personal responsibility and financial autonomy synonymous with cryptocurrency.
Why This Matters
While a mandatory risk test may protect some investors, the questionnaires do little to tailor smart regulations that encourage cryptocurrency adoption, nor do the questionnaires deal with systemic risks that require action at the governmental level.
Read about FCA research uncovering a decrease in crypto use for payments here:
Crypto Payments Drop Significant, FCA Survey Finds
Find out more on the report that concluded spot BTC ETFs are unlikely to be approved here:
Crypto Crash “Beyond Our Control,” Says Matrixport’s Wu