As the price of the controversial “cryptocurrency” Bitcoin plunges, new figures show that the City watchdog is stepping up its investigations into the murky sector. The number of inquiries into businesses involved in the new breed of digital currencies has doubled, according to figures from the Financial Conduct Authority (FCA) obtained by Telegraph Money.
In response to a Freedom of Information request the FCA said it had conducted inquiries into 50 firms it suspected of operating in areas of financial services without its permission. In May this year it had looked at only 24 firms. In addition, the regulator said it had received seven whistle-blowing reports from concerned employees of crypto businesses this year. There were none in the previous three years.
Bitcoin is the best-known of dozens of virtual currencies that have captured the imagination of millions of ordinary people. It was created nearly a decade ago but entered the mainstream lexicon last year, when the price of a Bitcoin surged to about $20,000. But this week the price fell below $5,000 for the first time in 18 months.
Some investors were attracted by the concept of wresting control of money from the world’s central banks. Others thought it was an opportunity simply too good to miss. Andrew Jacobs, a partner at Moore Stephens, an accountancy firm, said: “The huge sums lost as a result of cryptocurrency prices falling this year will have triggered a rash of complaints to the FCA.
“Now that prices have collapsed, fraud is likely to be exposed, with greater pressure coming to bear on the FCA to ensure that this market can operate transparently and fairly.”
Cryptocurrencies are unregulated, although the Treasury, Bank of England and FCA have formed a “cryptoassets task force” to monitor the impact on the financial system.
In a speech this month, the FCA’s Christopher Woolard warned: “[Consumers] may buy unsuitable products, face large losses, be exposed to fraud, struggle to access services or be exposed to the failings of providers such as exchanges.”