With just a month to go before the closing date of the Financial Conduct Authority’s consultation on crypto regulation, leading figures within the industry are calling for more clarity from the independent body.
The FCA is looking to provide a full guidance package on digital assets in a drive to set out specific guidance for users of cryptocurrency.
Although welcoming the consultation, some major influencers are suggesting that take-up of crypto assets by many people in the UK and the rest of the world has been hindered by uncertainty over regulation.
In the United States, the Securities and Exchange Commission (SEC) has led the vanguard in the fight to bring regulation to the top of the crypto agenda. Throughout much of 2018, the SEC cracked down on exchanges, ICOs, and individuals it felt were operating on the wrong side of normal restrictions.
The FCA is now looking to replicate the momentum created by the SEC by outlining its own plans for regulation of crypto assets in the UK.
However, some major industry figures are keen to point out that the FCA’s paper sets out an already-proposed policy and, therefore, comments before its April 5th deadline could be largely academic.
Author and Coin Rivet columnist Dominic Frisby welcomed the consolation, but criticised a “lack of clarity” from Her Majesty’s Revenue and Customs (HMRC), the UK’s tax office.
“Bitcoin is now in its 10th year and yet still in many countries around the world regulation is not clear,” he said.
“Bitcoin has exposed just how backward-looking and slow many authorities are. I do not know what the opposite of preemptive is, but they have been that.
He said the UK had been one of the leading countries in terms of regulation, but called for more decisive action to help businesses.
“Business needs clear and simple regulation to thrive, and if the UK can lead, it will attract new crypto business,” he added.
“HMRC has, to nobody’s surprise, been rather more laggard, and many Bitcoin investors have complained about HMRC’s lack of clarity – which is another issue in itself.”
Meanwhile, the chairman of CryptoUK – Iqbal V Gandham – urged policymakers to arm businesses with the tools they need to grow in the digital world.
“We welcome the FCA’s recognition that it needs to provide clarity and certainty to crypto asset firms on its regulatory perimeter,” he said.
“This is an important first step towards proportionate, well-designed regulation for our fast-growing industry.
“While recognising that it is the FCA’s role to prevent consumer harm, it is imperative that policymakers balance this with a framework which enables the sector to grow, attract inward investment, and supports the UK as a global hub for the industry, as we’ve seen in other forward-thinking markets.
“The paper acknowledges that only a small proportion of the world’s crypto exchanges are based in the UK compared with elsewhere. We firmly believe this will change with a proportionate and balanced regulatory framework, which would give crypto businesses the reassurance and security needed to base themselves here.
“The consultation is helpful in outlining where crypto assets fall into existing regulation, but HMT’s (Her Majesty’s Treasury) forthcoming consultation will prove an important next step in exploring the legislative changes needed to broaden the FCA’s remit to cover the unique qualities of crypto assets, which existing regulation is ill-equipped for.”
Thomas Power, author and respected thought-leader throughout the blockchain world, was keen to see the consultation process as an opportunity to ensure crypto businesses were protected.
“With dotcom 20 years ago, 99% of start-ups failed and 1% made it through,” he pointed out.
“The same is likely true with crypto assets, so the FCA’s advice appears sound.
“None of us can see the future. However, I do see a real market and asset class in emergence that is going to change and benefit consumers and business over the coming decade.”
Jonny Fry, CEO of Teamblockchain Ltd, praised the FCA and suggested its plans for regulation would raise the benchmark of standards across the industry as well as pave the way to ensure UK-based blockchain and crypto skills weren’t lost to other countries.
“If the FCA regulated the existing cryptocurrencies (as well as security tokens which are now coming to the market), then companies running crypto exchanges could become regulated, and this would help raise the standards of know-your-customer (KYC) and anti-money laundering (AML),” he said.
“The FCA has done a fantastic job encouraging innovation with its sandbox.
“We need sensible guidance to embrace and encourage digital assets to keep companies and highly paid jobs in the UK.
“This will encourage further innovation that will help all parts of society, not just the financial services sector.
“The UK – being geographically between the Americas and Asia, and with English law being highly respected and the basis of law in many countries – has a wealth of innovation talent and influential deep pools of capital.
“These are strengths the FCA can build on and help maintain the UK as a major financial centre globally.”
The FCA’s consultation process started in January and ends on April 5th. The consultation paper can be downloaded here – https://www.fca.org.uk/publication/consultation/cp19-03.pdf.
A policy statement on digital assets will be outlined later this summer.
The FCA’s executive director of strategy – Christopher Woolard – assured consumers that they would benefit from the protection offered by regulation.
“This is a small but growing market and we want both industry and consumers to be clear what is regulated and what isn’t,” he said.
“This is vital if consumers are to know what protections they’ll benefit from and in ensuring we have a market functioning as it should.”