Randell, who was chair of both the FCA and Payment Systems Regulator between 2018 and 2022, attacked the proposals that would label crypto as an investment, "but without many of the same rules".
These include an "as yet unspecified" liability and capital regime for issuers and intermediaries, a potentially looser regime to judge whether intermediaries are acting in the client's best interests, as well as an initial "lighter touch" approach to market abuse, and possible delegation of the first line of market abuse surveillance to a crypto industry association.
Treasury finalises plans to regulate crypto industry
On 30 October, the Treasury finalised its plans to regulate the crypto industry following a consultation, incorporating it into the existing regulatory framework for traditional financial services.
However, Randell noted that the proposed regulation does not contain "any of the cost-benefit analysis that the government requires from the FCA", instead focusing on the popularity amongst respondents to the consultation, who "stand to make money from boosting crypto".
"There is no attempt to quantify the consumer harms that could result from holding crypto out as a regulated investment," he added.
The former FCA chair claimed that the "fraud" of much of the activity in retail crypto had been revealed by the massive crashes the sector saw last year.
"Since then, Bitcoin has been mostly correlated with expectations of regulatory easements, since still no one can figure out what it is for. Wisely, the Treasury document does not try," he said.
Deep Dive: Tokenisation represents 'paradigm shift' for asset management
He added that "on the upside for the regulator", the implementation of the regulatory system will take some time, by which time "some more lessons about the realities of crypto may have arrived".
"On the downside, if the regulator does not get out of this task, the chances of it succeeding in its mission are low," he concluded. "Not least because if it does try to enforce the requirements that the minister has approved, it can, based on recent experience, expect a letter from the minister asking it not to do so."
The FCA has been contacted for comment.