It’s time for regulators to get to grips with the ‘Wild West’ market for crypto assets and currencies, according to an influential groups of ministers.
A Treasury Select Committee report has called for issues faced by investors trading in crypto assets to be handled more vigorously. Some of these issues include volatile prices, hacking vulnerabilities and anonymity aiding money laundering.
The committee wants the Financial Conduct Authority (FCA) to begin regulating the market, with consumer protection and anti-money laundering rules put in place as a minimum. Part of the FCA’s approach should also include consideration of whether the market should be allowed to grow and flourish.
A growing and better-regulated market will become more liquid, and as it matures the UK is well-placed to become the global centre for this activity.
Nicky Morgan MP, chair of the committee, said that it is “unsustainable” for the government and regulators to “bumble along issuing feeble warnings” to potential investors, but not being prepared to act if necessary.
The committee also pointed out that adverts from initial coin offerings (ICOs) and crypto asset exchanges are not regulated by the FCA and “one-sided adverts imply that the market will only go up”.
The committee also believes the anonymity afforded to crypto asset exchanges means they can facilitate the sale and purchase of illicit goods, or launder the proceeds of crime.
Price volatility is a key concern, with Bitcoin’s large price swing between November 2017 and February 2018 cited as an example, while the hacking and theft of crypto assets prior to them being converted into conventional currency is also a major worry.
For deVere Group founder Nigel Green, the committee’s direction is welcomed as “proactive and aggressive”, and a “first step” towards putting regulation in place.
Green said: “The conclusion made by the committee about cryptocurrencies puts them on the right side of history. Its findings that these assets should be brought into a regulatory framework demonstrates once again that they are now a part of mainstream finance.”
DeVere launched its own exchange app, deVere Crypto, earlier in the year.
Kevin Reed is one of the UK’s most senior accounting and finance journalists. He is a former editor of Accountancy Age and Financial Director, and writes regularly on corporate and professional services governance.
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