The Treasury Select Committee has called on the UK regulator to introduce new laws in the emerging asset class of crypto-assets, otherwise known as cryptocurrencies.
The key findings from the report were:
- Regulation is needed for a “Wild West” crypto-asset market
- Problems include volatile prices, hacking vulnerabilities, minimal consumer protection, and anonymity aiding money laundering
- Blockchain is currently slow, costly and energy-intensive, but there is potential for data storage uses
- The ambiguity of the UK Government and regulators’ position is not sustainable
- Regulation could improve customer outcomes, enable sustainable growth, and reduce certain risks
- In deciding the regulatory approach, the Government should decide if growth should be encouraged
- Proportionate regulation could see UK well placed to become a global centre for crypto-assets
The report was in line with what many in the industry have already expressed, ultimately that the FCA follows other international regulators, like the Swiss regulator, FINMA in properly evaluating this market space and regulating accordingly.
Self-regulation and AML
While the FCA, and other regulators have stayed away from this asset, the formulation of self-regulating bodies has assisted companies dealing in crypto-assets to signal to the market their operations follow best practices.
The Treasury Select Committee believes additional regulation would protect consumers further, particularly those who are not aware of the self-regulating bodies and what these self-imposed standards do and do not protect against.
In the absence of formal regulation, many entities, such as BCB Group, have chosen to shadow banking regulations, including AML, to minimise the risk of nefarious dealings and to build trust in the industry.
As with all nascent assets as they first emerge, Bitcoin and other crypto-assets are hugely volatile in price. It is important that entities communicate this risk in strong terms, especially to the retail sector. Regulation on the topic would make it mandatory, thus protecting consumers. The legitimate entities who take a long term view on crypto-assets should welcome these sorts of regulations which point to further maturation of the industry.
ICOs and scammers
Regulation in this space would be a very welcome development. No one appreciates bad actors in this market sector. They can give the sector a bad name by association, which is unfair to other legitimate businesses and crypto-assets. Regulation in the classification of a token or crypto-asset through to the advertising and marketing, which exists in the more traditional asset classes, is needed.
There is a balance between allowing new technologies to flourish, and not overly regulating them before they’ve had chance to show their value and potential, balanced against leaving people at risk from bad actors conducting illegal activities.
There is also added complexity given the global nature of crypto-assets. Regulators need to collaborate and communicate with each other if they want to regulate effectively within their own regions, as well as creating processes that give legitimacy to experienced and established players.
At BCB Group, we believe in the long term future of crypto-assets as they become an important part of the global financial infrastructure for both value transfer and historical record keeping, and look forward to the creation of a regulatory environment that will maintain Britain’s position as a world leader in financial services.
Mark is a data scientist and digital currency SME with 20 years of experience working in varied financial services firms across multiple sectors. With a proven track record in software and data delivery, Mark has, over the past 3 years, increasingly focused on cryptocurrency analytics and market dynamics. He holds qualifications in finance, quantitative modelling of derivatives and software programming.
Starting as an Independent Financial Advisor, Bridget pivoted her career to emerge as a pioneer in financial services social media. A founding director of Financial Social Media UK, Bridget has attracted multiple industry awards. Aware that technology marches forward no matter your view point on how it might disrupt incumbents in your market place, especially in traditional industries, Bridget vehemently believes that staying in front of technology is essential to survival and success. How you can harness these changes, rather than deny, impede and ultimately be left behind, is the key for best serving your clients and customers.