UK Watchdog Warns Against FTX Weeks After Crypto.com Granted Business Approvals

The financial regulator of the United Kingdom has issued a warning to consumers against the FTX cryptocurrency exchange, just weeks after granting business approvals to Crypto.com.

The Financial Conduct Authority told consumers that it believed FTX to be operating in the UK without proper authorization, in a release on its website. “Almost all firms and individuals offering, promoting, or selling financial services or products in the UK have to be authorized or registered by us,” the regulator said. “This firm is not authorized by us and is targeting people in the UK.”

The watchdog emphasized that investors engaging with FTX would not have access to traditional consumer protections, such as the Financial Ombudsman or Financial Services Compensation Scheme, concluding that they would be unlikely to receive any compensation, “if things go wrong.”

Crypto.com gains ground in the UK

Yet, as FTX faces a similar trial with the authority as Binance did last year, rival platform Crypto.com recently managed to become one of the few offering crypto services to receive approval to operate in the UK. The registration enables Crypto.com to offer a suite of products and services to customers in the UK, compliant with local regulations and anti-money laundering and “terrorist” financing rules.

Although its ads featuring celebrities have taken some flak earlier this year as the markets have downturned, Crypto.com has seen a recent streak of approvals. Last month saw it become the first crypto platform to receive approval from the Ontario Securities Commission, in addition to receiving authorization as a virtual-asset service provider through a pair of acquisitions in South Korea.

Earlier, Crypto.com had also received regulatory approval from the Italian watchdog Organismo Agenti e Mediatori (OAM). As proposed legislation from the European Commission called Markets in Crypto Assets (MiCA) would enable firms registered with one national authority to operate across the European Union, this approval has granted a prospective entry to the European market.

Facing scrutiny

While FTX gained regulatory approval in Cyprus earlier this year, which would grant it similar authority to operate in Europe, the FCA’s scrutiny of the firm’s actions is becoming increasingly shared. FTX and sister Sam Bankman-Friend venture Alameda “have been able to benefit from a regulatory gap that has allowed them to trade and profit from cryptocurrencies without having to follow the same rules as traditional financial institutions,” according to one expert.

Although no impropriety has taken place, the fact that the second-largest cryptocurrency exchanges in the world and one of the fastest growing market makers in the industry have been so intrinsically connected from their inception may present inherent ethical ambiguities. 

According to Larry Tabb, head of market-structure research at Bloomberg Intelligence, exchanges and market makers with close ties and financial interests are “not conducive to being a fair marketplace.” There are “reasons to split up the functions, to make sure everyone is on the up and up,” Tabb added. “When you consolidate and decompress divisions, you get inherent conflicts.”