With regulations on cryptocurrencies taking precedence over the world, the United Kingdom has also jumped the wagon. The UK’s Treasury Committee published a “unanimously-agreed report on crypto-assets for its Digital Currencies inquiry.”
Among other findings, the committee stated that Initial Coin Offerings (ICOs) and cryptocurrencies do not currently fall under Financial Conduct Authority (FCA) regulation. Crypto-asset investors are currently afforded very little protection from the litany of risks, namely there are no formal mechanisms for consumer redress, nor compensation.
Terming the cryptocurrencies as ‘Wild Wild West’ to convey a sense of lawlessness in the system, the committee said that self-regulating bodies in the crypto-asset industry, which set out codes of conduct and best practice for the industry, are wholly voluntary. Inevitably, there are firms that will ignore them. which is clearly insufficient.
It also elaborated the point by stating that the government and regulators should evaluate the risks of crypto-assets, and assess whether their growth should be encouraged. If growth is favoured, regulation could lead to positive outcomes for the crypto-asset market, including the move toward a more mature business model and increased liquidity. If the UK develops a proportionate regulatory environment for crypto-assets, the UK could be well placed to become a global centre for this activity.
It also touched upon the volatility of prices of cryptoassets and added that while investors may earn a lot, once the prices go up, a lot of investors stand to lose a large amount of money, in case the prices plunge.
Commenting on the extensive report, Rt Hon. Nicky Morgan MP, Chair of the Treasury Committee, said, “Bitcoin and other crypto-assets exist in the Wild West industry of crypto-assets. This unregulated industry leaves investors facing numerous risks. Given the high price volatility, the hacking vulnerability of exchanges and the potential role in money laundering, the Treasury Committee strongly believes that regulation should be introduced.”
He added, “It’s unsustainable for the Government and regulators to bumble along issuing feeble warnings to potential investors, yet refrain from acting. At a minimum, regulation should address consumer protection and anti-money laundering. If the Government decides that crypto-asset growth should be encouraged, appropriate and proportionate regulation could see the UK become a global centre for this activity.”