On Wednesday, Nikhil Rathi, CEO of the United Kingdom's Financial Conduct Authority, or FCA, issued the following statement to the Treasury Committee when asked about the risks of the much-unregulated cryptocurrency sector in the country:
In the passage, Rathi refers to the FCA's Financial Services Compensation Scheme, or FSCS, which pays out compensation to consumers when certain authorized financial institutions cannot meet claims against them, such as during bankruptcies, criminal schemes or insurance breach-of-contract. In theory, the proposed rules would prevent U.K. government from paying restitution to crypto investors who have been scammed by allegedly fraudulent cryptocurrency exchanges or decentralized finance rug pulls, as these types of investments are either unregulated or operate in legal grey areas. More than 717 million pounds were paid out to consumers this year by the FSCS in compensation for their financial loss.