Cryptocurrency Regulation: UK Treasury Committee Report Calls For New Rules

The United Kingdom is looking to tighten cryptocurrency regulations. In this photo illustration, a visual representation of the digital currency bitcoin sinks into water in London, Aug. 15, 2018. Photo: Dan Kitwood/Getty Images

By Ranjitha Shastry, International Business Times

The Treasury Committee of the United Kingdom published a "unanimously- agreed" report Wednesday on cryptocurrency assets. The report, which came following the committee's inquiry into digital currencies, was directed at regulating crypto assets, which it said was in a "wild west situation" at present.

The problems that have been recognized by the U.K. Treasury Committee in the crypto assets space are volatile prices, vulnerabilities to hacking, minimal consumer protection, and anonymity that could aid money laundering. As for blockchain, the committee findings recorded the technology was currently slow, costly, and energy-intensive but, "there is potential for data storage uses."

"The ambiguity of the U.K. Government and regulators' position is clearly not sustainable. Regulation could improve customer outcomes, enable sustainable growth, and reduce certain risks," findings of the report noted.

The report also recommended that while drafting regulations, the government should determine if growth should be encouraged in the crypto space, as well as consider that proportionate regulation could make the country a global center for crypto assets. The committee suggested that for introduction of regulation of crypto assets and associated activities, the quickest method would be to provide the Financial Conduct Authority (FCA) — financial regulatory body in the U.K. — with the necessary legal powers to execute its duties of protecting consumers and maintaining market integrity.

"Designing a new framework of regulation would inevitably take much longer and given the growing risks surrounding crypto assets and subsequent consumer detriment, the introduction of regulation should be treated as a matter of urgency," the report advised.

The government should also define what activities under the crypto space should be included in the Regulated Activities Order, the report recommended.

Commenting on the report, Nicky Morgan, a member of the country's parliament and 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."

Morgan also recognized the necessity to introduce the regulations and said they should at least address consumer protection and anti-money laundering.

"It's unsustainable for the Government and regulators to bumble along issuing feeble warnings to potential investors, yet refrain from acting," Morgan added.

CryptoUK, a self-regulatory trade association for the country's cryptocurrency industry, said it welcomed the committee's recommendations.

Iqbal Gandham, chairman of CryptoUK, told BBC: "Regulatory oversight is essential to ensuring consumer safety, guarding against malpractice and providing much-needed clarity to an industry that is fast maturing. It is therefore pleasing that the committee has endorsed our suggestion on how this can be delivered, by bringing responsibility within the FCA's perimeter of oversight."

In May, CryptoUK addressed the Treasury Committee to advocate for cryptocurrency regulations, citing its intention to explore the role of digital currencies in the U.K., including risks connected to their usage by consumers, businesses, and the government.

There are now over 1,500 varieties of cryptocurrencies that are traded on almost 200 exchanges worldwide. Prices of cryptocurrencies rose dramatically in 2017 before crashing in an equally spectacular fashion in the early months of 2018. In December 2017, the price of a bitcoin soared to almost $19,000 before falling to almost $6,000 in mid-August, as tracked by CoinMarketCap.

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