In today’s Exponential Investor:

  • How is that part of the crypto world that is in the UK changing?
  • Spotting scammers: what are the red flags?
  • More regulation in the UK means what?

The crypto landscape in the UK is changing.

For the better or worse, honestly right now, we’re not sure.

What we do know is that regulators and the government want to get their sticky fingers all over the metaphorical crypto pie.

Maybe the government sees it as an avenue to gather more taxes.

Maybe the regulator just doesn’t like not having control over something – or maybe it does want to act in the best interests of consumers.

You’d hope that it’s the latter. And if it is, that’s great.

The more measures that are put in place to protect people from getting ripped off the better. There are too many scammers out there.

Weekly I get emails or speak to people and various events that have been or are in the process of getting scammed.

As such, I’ve been writing about scams and scammers for years. In particular, I have written at length about how to spot and avoid scams.

That is what I want to touch on in this edition of Exponential Investor.

Knowing and spotting the red flags

Late last year, I was presenting at a conference on decentralised finance (DeFi) – mainly saying that people should avoid it and stick to the basics like buy, hodl and stake. Afterwards, I got talking to a few people.

One lovely guy gave me a tale that left me certain that he was the victim of a scammer.

The massive red flags that he described to me included things like account managers calling to encourage more deposits, a tiny deposit in a massive crypto winter rising strongly, and promises of guaranteed returns.

Maybe you’ve seen or heard similar things yourself in this space…

The scammers know how to hook you and then to keep you. Once you’ve deposited money and try to get it back, you can’t. Then you will be told that if you pay more, it can be released. The pain compounds from there.

strongly urge you to contact me if you feel unsure about a crypto investment or platform you’re looking at or already a part of. There is a good chance that I will correctly identify a scam – if there is one.

What the regulator wants and what the regulator gets…

Now back to my original train of thought…

The Financial Conduct Authority (FCA – the relevant UK regulator) is dead-set on using legislation is that currently going through parliament to bring “cryptoassets” further under its remit.

As noted, I don’t mind greater consumer protection. Any assistance we can get to protect consumers from rogue operators is welcomed.

In fact, the FCA has its own ScamSmart platform aimed at helping consumers figure out if an investment opportunity – whether crypto or not – is likely to be a scam.

However, for the benefits of extra consumer protection, the worry is that the FCA and HM Treasury will overreach because of a potential misunderstanding of the actual threats and risks of the crypto world.

The likes of the collapse of crypto-exchange FTX do need to be dealt with appropriately. And measures to prevent massive corporate failures in the industry should be put in place.

There should be some checks and balances on organisations that offer crypto-financial services – as FTX did.

So too do other crypto exchanges. There should, in my view, be greater transparency and scrutiny.

However, when there’s a call for regulation, consumer protection is a given.

But in reality, what people really want is transparency. That’s all we want.

We want to know who we’re dealing with is trustworthy, that the company in question will do what it says that it does, won’t dupe us and, importantly, won’t steal or misappropriate our money.

We want trust. But just because a service or product is regulated doesn’t mean they can be trusted implicitly.

Regulation should equal a fair playing field and parameters to build trust, but trust itself will not come from regulation.

My worry is that excessive regulation and overreach from government and central authority ends up doing more damage to the industry than good.

In particular, it could stifle exploration, experimentation and innovation.

I also fear that it pushes good quality information and research out of reach of consumers under the guise of consumer protection.

In an extreme situation, regulatory overreach could make the crypto world impossible to access by the public.

In short, the regulator should be careful not to push the good guys out of the market and the bad actors underground.

Our online world is a pretty easy place to operate in grey areas – as that’s apparently what FTX did. Without care, regulators may not get the outcome that they want.  

A bad and very scary result would be one where people do things on their own accord regardless without appropriate guidance, information and insight.

Growth will continue

What really matters, though, is that actions by the UK regulator to exert greater control over DeFi (the crypto world by another name) in line with that exerted over traditional finance (TradFi – the financial institutions that have been around for a very long time as well as some new disruptors) won’t stop the growth of crypto.

It may slow growth, but it won’t end it.

As we all know, crypto is not limited to just the UK. It’s a truly global phenomenon.

While the thawing of the crypto winter may take more slowly in the UK than in other places, a crypto summer will ultimately arrive everywhere.

And that’s arguably the most exciting thing in the crypto world right now.

But of course, while I might think crypto is the most exciting thing in all markets, that doesn’t escape the fact the market has copped a hiding in the last year. So it clearly makes sense not to have all your “wealth eggs” in one basket. I don’t, and neither should you. There are other ways to make money in the market – one of those involves just making two trades per month tapping into a known, predictable and regular “cash surge” into the stock market. I suggest you have a look at exactly what I mean by checking out the Rapid Money Masterclass which is available for you to access now, all you have to do is click here to get access.

Until next time…

Sam Volkering
Editor, Exponential Investor

PS Just a reminder that Exponential Investor is changing. I’m joining forces with my colleague Nick Hubble over at Fortune & Freedom, to bring you wider ranging daily market analysis.

Starting Monday 30 January, you’ll be hearing from us on a daily basis in Fortune & Freedom.

The good news is you don’t have to do a thing as part of this exciting change – except “whitelist” a new email address, [email protected], so we don’t get sent to your junk folder. If you don’t know how to do that – just click here.