He said the FCA has allowed 17 crypto firms through but it's been “a very challenging set of conversations”.
“We've had to be more rigorous with the e-money firms because it's not always clear, particularly for vulnerable customers who use some of these electronic walls, that their money is not protected by the FSCS if things go wrong.”
Rathi explained the FCA has had to take a “demanding stance” with some of these e-money firms in order to protect vulnerable customers who may be using them.
He said: “We have some work to do, that I would accept, but I would say that we are in a world where we are putting more grit in the system and some of that is deliberate and that applies right across the board.
“There is always the balance we're trying to strike and we hope that we can make it proportionate.”
Giving the example of London Capital & Finance, he said it was a representation of how a small firm can do harm.
He added: “One of the criticisms we received was that we weren't inquisitive enough, we weren't demanding enough and we weren't probing enough on a whole range of issues. Part of the issue we also deal with is that sometimes the applications that come to us don't have all the information we need and sometimes there is resistance to providing additional information in response to our questions.
“This is going to be a learning journey for us and I can imagine that some firms will find some of the questions we are posing uncomfortable but I think but that is the direction we are going in and I hope that we can strike the balance.”
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