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UK watchdog warns against FTX weeks after Crypto.com wins trading approvals

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UK watchdog warns against FTX weeks after Crypto.com wins trading approvals

The UK financial regulator has issued a warning to consumers against the FTX cryptocurrency exchange, just weeks after granting trading approvals to Crypto.com.

The Financial Conduct Authority has told consumers it believes FTX is operating in the UK without proper authorisation, in a Release on its website. “Almost all businesses and people offering, promoting or selling financial services or products in the UK must be authorized or registered by us,” the regulator said. “This company is not authorized by us and targets people in the UK.”

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

Crypto.com is gaining traction in the UK

Yet while FTX faces a similar lawsuit with authority as Binance did it last yearrival platform Crypto.com recently managed to become one of the few offering crypto services to be licensed to operate in the UK. Registration enables Crypto.com to offer a suite of products and services to customers in the UK that comply with local regulations and anti-money laundering and anti-terrorist financing rules.

Although its advertisements featuring celebrities have took some flak earlier this year, as the markets retreated, Crypto.com recently saw a string of approvals. Last month, it became 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 acquisition pair in South Korea.

Previously, Crypto.com also received regulatory approval from Italian watchdog Organismo Agenti e Mediatori (OAM). As legislation proposed by the European Commission called Markets in Crypto Assets (MiCA) would allow companies registered with a national authority to operate throughout the European Union, this approval granted potential entry into the European market.

Face intense scrutiny

While FTX obtained regulatory approval in Cyprus earlier this year, which would grant it similar authority to operate in Europe, the FCA’s review of the company’s actions becomes more and more shared. FTX and sister company Sam Bankman-Friend Alameda “were able to take advantage of a regulatory loophole that allowed them to trade and profit from cryptocurrencies without having to follow the same rules as traditional financial institutions,” an expert says. .

While no irregularities have occurred, the fact that the world’s second largest cryptocurrency exchange and one of the fastest growing market makers in the industry have been so intertwined since 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 market.” There are “reasons to split the functions, to make sure everyone is up to scratch,” Tabb added. “When you consolidate and decompress divisions, you get inherent conflicts.”

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