UK Treasury Committee: Crypto self-regulation unsustainable

Yet more calls for the cryptocurrency space to be regulated in order to protect consumers

The UK Treasury Committee has labelled Bitcoin and other cryptocurrencies a “Wild West industry” and called for regulations in order to protect investors, the BBC reports.

The committee said there were no well-functioning cryptocurrencies and preferred to call them crypto-assets. It urged UK regulator Financial Conduct Authority to supervise them.

“Crypto-asset investors are currently afforded very little protection from the litany of risks. Namely, there are no formal mechanisms for consumer redress, nor compensation,” said the committee.

“As the government and regulators decide whether the current Wild West situation is allowed to continue, or whether they are going to introduce regulation, consumers remain unprotected.”

Nicky Morgan, who chairs the committee, said: “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.”

Self-regulation only ever a starting point

CryptoUK, which was set up in February as a self-regulatory body for the cryptocurrency industry, said it welcomed the Treasury Committee’s recommendations.

Iqbal Gandham, who chairs it, told the BBC: “Self-regulation by the industry was always intended to be a starting point – this must now be matched by government action. 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.”

Japan

Japan’s financial regulator, the Financial Services Agency (FSA), recently said it would like the cryptocurrency industry to grow “under appropriate regulation”.

In an interview with Reuters, FSA Commissioner Toshihide Endo claimed the regulator had no intention to curb the space excessively. Instead, it is trying to strike a balance between protecting consumers and promoting technological innovation.

Last year, Japan became the first country to regulate cryptocurrency exchanges. The FSA started clamping down on the industry following the $530 million (£411.5 million) theft of digital money from Tokyo-based Coincheck in January.

A series of FSA inspections uncovered poor management and a lack of basic internal controls at several exchanges. As a result, some exchanges were ordered to temporarily suspend operations.

The FSA is also thought to be refining its regulatory framework around cryptocurrency exchanges in order to boost consumer protection and better secure investor assets. It considers the current consumer protection mechanisms afford by the Payment Services Act to be insufficient, according to local publication Sankei.

The review could see crypto exchanges being brought into the realm of Japan’s Financial Instruments and Exchange Act, which requires traditional securities firms and stock brokerages to manage customer funds and securities separately from corporate assets. This shift could result in cryptocurrencies being classified as a financial product, giving them exposure to mainstream financial markets.

Related Articles