A senior executive at one of the world's largest cryptocurrency exchanges has publicly challenged British financial regulators, arguing that consumer protection measures intended to safeguard investors are instead creating barriers that limit access to digital asset services. Kraken Co-CEO Arjun Sethi told the Financial Times that the Financial Conduct Authority's strict promotional rules have degraded the user experience on crypto platforms while restricting UK customers from accessing three-quarters of the products available to American users.
What to Know:
- The FCA's 2023 Financial Promotions Rule mandates prominent risk warnings and multi-step questionnaires on all UK crypto platforms, measures Sethi compares to cigarette packaging warnings
- Kraken's UK users can access only 25% of products available to the exchange's U.S. customers due to regulatory restrictions, according to the company's co-chief executive
- Industry debate has intensified following the regulator's ban on Coinbase's advertising campaign and the Bank of England's proposal to cap individual stablecoin holdings
Regulatory Friction Intensifies Between Exchange and Watchdog
The criticism from Kraken's leadership reflects growing tension between cryptocurrency companies and UK financial authorities over the pace and scope of digital asset regulation. Sethi described visiting any crypto website in Britain, including his own company's platform, as an experience dominated by warnings that make users feel the service itself might be harmful.
The Financial Promotions Rule, implemented in 2023, requires crypto firms operating in Britain to display prominent risk disclosures on their websites.
The regulation also mandates what regulators call "positive frictions"—additional steps such as questionnaires designed to assess whether users understand the risks associated with cryptocurrency investments. These measures force users through multiple screens before they can complete transactions.
Sethi acknowledged that disclosure requirements serve an important purpose. However, he argued the FCA's rigid implementation discourages legitimate investment rather than simply educating potential customers. The additional transaction steps, he said, create a worse user experience without meaningfully improving safety.
The regulator's approach gained attention earlier this year when it banned Coinbase's "Everything Is Fine" advertisement. The FCA maintains its measures aim to protect consumers, not prevent investment. Officials stated that some users may conclude crypto investing is unsuitable for them after reviewing the warnings—an outcome the agency characterized as evidence the rules are "working as intended."
Industry Leaders Challenge Regulatory Direction
Sethi is not the only Kraken executive expressing concern about UK policy. Bivu Das, managing director of Kraken's British operations, recently criticized the slow pace at which regulators are establishing a comprehensive framework for digital assets. Das specifically questioned the Bank of England's proposal to impose caps on individual stablecoin holdings, calling the plan unclear.
Coinbase's vice president of international policy echoed these concerns, noting that no other major financial jurisdiction has introduced similar restrictions on stablecoin ownership.
The uncertainty around these proposed limits has created additional confusion for companies trying to operate in the UK market.
Not everyone in the financial sector shares this critical view. David Heffron, a financial regulation partner at Pinsent Masons, said the Bank of England's new direction demonstrates a strong commitment to financial stability. Hannah Meakin of Norton Rose described the regulatory approach as a foundational step necessary to maintain Britain's competitiveness in digital finance.
The competing perspectives highlight a fundamental disagreement about whether strict regulation protects the UK's position in the global crypto market or undermines it. Proponents argue that robust consumer protections will build long-term confidence in digital assets. Critics contend that excessive caution drives innovation and investment to more permissive jurisdictions.
Understanding Digital Asset Regulations
The Financial Conduct Authority serves as Britain's primary regulator for financial services, including cryptocurrency exchanges. The Financial Promotions Rule represents the agency's effort to apply consumer protection standards developed for traditional investments to the crypto sector. "Positive frictions" refer to deliberate obstacles in user flows designed to slow down decision-making and encourage consideration of risks.
Stablecoins are cryptocurrencies designed to maintain a stable value by pegging their price to traditional currencies or other assets. The Bank of England's proposed caps on individual holdings would limit how much of these digital assets any single person could own, ostensibly to reduce systemic risk.
Closing Thoughts
The dispute between Kraken's leadership and British regulators illustrates the ongoing struggle to balance consumer protection with market access in cryptocurrency regulation. Despite regulatory challenges in the UK, Kraken recently acquired Small Exchange, a CFTC-licensed Designated Contract Market, for $100 million, demonstrating the company's continued international expansion.