The UK's Treasury Committee believe cryptocurrency regulation is needed as the market becomes vulnerable to volatile pricing, hackers, poor consumer protections and being used as a tool for money laundering
Cryptocurrency regulation is needed to restrain markets for trading Bitcoin, Ethereum and Litecoin that have become akin to the “Wild West”, say UK politicians in a new report.
The Treasury Committee said digital currencies were vulnerable to volatile pricing, hackers, poor consumer protections and being used as a tool for money laundering.
It added that the Financial Conduct Authority (FCA) should have more regulatory power over the market.
Treasury Committee chairwoman Nicky Morgan 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.
“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.”
Call for cryptocurrency regulation follows market investigation
The Treasury Committee report has come seven months after MPs first said they would be investigating the digital currency market.
It found the “ambiguity” of cryptocurrency regulation in the UK was “not sustainable” and that slapping rules on the market would help it grow in the long-term.
The report summary read: “In deciding the regulatory approach, 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 towards 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.”
Cryptocurrency regulation should stick warnings on ‘one-sided adverts’
The Treasury Committee dubbed marketing of Initial Coin Offerings “one-sided”. (Wikipedia Commons/Diliff)On top of concerns about hacking, money laundering and cryptocurrency volatility, the Treasury Committee raised issues with initial coin offering (ICO) and cryptocurrency exchange adverts.
ICOs are offers of cryptocurrency in exchange for regular currencies, typically made by start-ups seeking investment capital.
In its summary on ICOs and crypto exchanges, the Treasury Committee report said: “The advertisements of both ICO issuers and crypto-asset exchanges are not regulated by the FCA.
“One-sided adverts imply that the crypto-asset market will only go up, and that anyone can make a lot of money easily.
“The FCA’s consumer warnings are a feeble corrective to such misleading adverts.
“The regulator needs more power to control how crypto-asset exchanges and ICOs market their services.”