Traditional stock markets must cut red tape if they are to lure retail investors away from crypto, the chief executive of the London Stock Exchange has said.
“If we want to protect consumers, we should make it easier for them to buy regulated assets instead of forcing them into the unregulated market, which is easier to access because there are fewer restrictions on doing so,” he said. Julia Hoggett at Financial News. .
Until as recently as this March, when the Financial Conduct Authority stepped in to shut them down, retail investors could use “crypto ATMs” to buy cryptocurrencies in seconds. Hoggett told FN that traditional finance still has a role to play in becoming more attractive if they are to win over a new generation of investors.
“It shouldn’t be easier to buy a cryptocurrency from a teller at the corner store than it is for [retail investor] to buy a share in the Oxford Nanopore IPO,” he said.
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Regulators have become more focused on their oversight of cryptocurrencies as the so-called “crypto winter” bites. The beginnings of tighter regulation are beginning to filter through the legislative process in the UK, EU and US.
But the rules on equity investment have not kept pace with market changes and are “based on very analog time,” he added. “Most people now consume financial products via apps or email rather than physical documents.”
Hoggett pointed to potential improvements in the UK, including the Financial Markets and Services Act, published on July 20, and the review of secondary capital raising completed by Mark Austin.
“The vast majority of all the regulatory changes that the government has proposed are very focused on retail licensing, which I think is critical,” he said.
Beyond improving retail access to financial markets, Hoggett said the financial industry itself needs to change the language it uses when discussing investing with the average consumer.
“As an industry, we talk about fundamentals, coverage ratios and language that excludes people who aren’t in finance from really understanding what we’re talking about,” he said.
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“Simply changing that language from being very self-referential to reflecting the end purpose and who the end customers are … the users and providers of capital are spread across this country and around the world.
“People talk about ‘The City’ as this alien thing that matters to bankers, exchanges and lawyers in the Square Mile. It doesn’t necessarily matter to someone in Cumbria, Glasgow or Belfast. But it should be.”
The advantages of investing in traditional stocks or debt also need to be reinforced for investors, Hoggett said.
“It’s reinvesting in businesses, jobs and potential for the economy to grow. We should be encouraging people to do that.”
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To contact the author of this story with comments or news, please email Jeremy Chan