Cryptocurrency investors are worried about a potential regulatory crackdown after the UK headquarters of crypto exchange Coinbase was fined.

Investor concerns emerged on July 25 after Coinbase’s UK headquarters was hit with a $4.5 million fine for breaching a voluntary user agreement that prevented it from accepting customers deemed “high risk” by the Financial Conduct Authority (FCA).

In a particularly worrying sign, the penalty is the first instance in which the FCA has taken enforcement action on the basis of the Electronic Money Regulations Act 2011.

While some investors worry that this could mean increased scrutiny of other cryptocurrency exchanges in the region, legal experts do not see this as a threat to the broader ecosystem. FCA fine is a “one-off” enforcement action — Legal expert

The FCA’s action against Coinbase’s UK arm CB Payments (CBPL) marks a “one-off” enforcement action rather than a hardline stance against the wider crypto space, according to Charlotte Tregunna. Tregunna is a partner at the business crimes law firm Peters & Peters.

Stating that the penalty does not mean more applications for crypto platforms, Tregunna said:

“The fact that the FCA has not used its enforcement powers so far shows that it uses them as a last resort. CBPL had three years to fix their systems and controls, and yet they failed to do so. “This is a clear breach and the FCA cannot ignore it if given sufficient time to resolve it.”

He added that penalties for violating voluntary requirements are rare:

“If the FCA gets involved, firms will usually do anything to resolve the situation, especially if there is a voluntary requirement, for example if the firm has voluntarily agreed to improve its systems. “Usually there is no need to reach this stage.”

According to the UK regulator, the FCA’s investigation focused on the firm’s e-money transmission services rather than crypto asset transactions. Following the latest fine, Tregunna also states that the FCA aims to be a crypto-friendly regulator that does not hinder innovation:

“The FCA ultimately wants to be seen as reasonably crypto and e-money friendly. “This will present opportunities for providers and issuers to improve their standards and compliance frameworks, but if these opportunities are wasted the FCA will have no choice but to enforce.”

However, Tregunna noted that it is becoming increasingly difficult for crypto platforms to maintain corporate compliance in the growing industry.

“This is perhaps an indication that the corporate governance and compliance culture within e-money issuers and cryptoasset service providers has not kept pace with the steady increase in the use of these services over the past few years,” Tregunna said.

He added that new protocols need to have these governance structures in place before they are launched, as seen with the UK arm of Coinbase, or they risk being “left behind”.