The collapse of FTX is being viewed as a cautionary tale and a precursor for more prudent regulation by public and private sector players in the United Kingdom.
Bank of England deputy governor Sir Jon Cunliffe made headlines ahead of the Christmas weekend in an interview with Sky News, outlining his belief that greater protection needs to be afforded to investors in the U.K. looking to gain exposure to cryptocurrency markets.
Cunliffe stressed that prospective cryptocurrency users and investors should have a structure to invest in the asset class that ensures similar consumer protection and integrity to conventional financial markets.
The deputy governor highlighted increased interest in cryptocurrency markets from financial institutions and retail users as a driving force behind the need for greater regulatory oversight in the country:
“We had banks and investment funds and others who wanted to invest in it and I think we should think about regulation before it becomes integrated with the financial system and before it becomes a systemic problem.”
Cunliffe also used the collapse of FTX as an example where existing regulatory parameters guiding the traditional finance sector may have provided protection to users that have been left out of pocket:
“We saw things like clients’ money appears to have gone missing, conflicts of interest between different operations, transparency, audit and accounting.”
Drawing parallels to the gambling sector in the United Kingdom, Cunliffe said that investors should have access to a regulated environment that prevents losing access to funds as was the case in the collapse of FTX.
Related: UK crypto bill to restrict services from abroad: Report
Cointelegraph reached out to Mitch Mechigian, partner at investment firm Blockchain Coinvestors, for more insight into the current regulatory environment for the cryptocurrency and blockchain ecosystem in the United Kingdom.
Based in London, Mechigian highlighted his view that financial institutions and regulators continue to see value in blockchain technology and digital assets in a post-Brexit British economy:
“British financial institutions and banks — many of whom already are investing heavily in blockchain technology — continue to want to participate in the digitalization of commerce, which starts with digital assets, monies and commodities.”
The collapse of FTX demonstrates the importance of “prudent regulation,” according to Mechigian. He added that astute regulators in both the United States and the U.K. are drawing clear distinctions between “off-shore and fraudulent” enterprises like FTX and legitimate blockchain technology solutions that facilitate the digitalization of assets, money and commerce.
2022 has been a tumultuous year for politics in the United Kingdom, with three separate Prime Ministers taking office in the space of a few months. Despite the “political economic chaos,” Mechigian said that parliament continues to move toward passing the Financial Markets and Services bill, which would recognize cryptoassets as financial instruments.