UK government, FCA respond to Treasury Committee’s crypto-assets report

The UK Treasury Committee has published the responses of the government and the Financial Conduct Authority (FCA) to its crypto-assets report.

In September, the Treasury Committee published a report in which it made a number of recommendations including the regulation of the “Wild West” crypto-asset market, among other things.

In their response, both the government and the FCA made a reference to the report published by the Cryptoassets Taskforce, an initiative announced by the government earlier this year, in October.

The government said that it shares the committee’s concerns about the risks to consumers and market integrity associated with cryptoassets, and their potential use for illicit activity. It added that mitigating these risks are among its immediate priorities.

“However, the Government also recognises the potential presented by DLT and considers that, while there is limited evidence of the current generation of cryptoassets delivering benefits, this may change in the future,” the government said. “The Government and regulators will therefore continue to encourage innovation and responsible development of legitimate DLT and cryptoasset related activity in the UK, while also taking strong action to manage risks.”

The committee’s report had also recommended that more powers should be given to the FCA to control how crypto-asset exchanges and Initial Coin Offering (ICOs) market their services. It also set out a plan issue “perimeter guidance” by the end of this year to clarify “which cryptoassets fall within the existing regulatory perimeter, and those cryptoassets that may fall outside.”

The FCA welcomed the committee’s report saying that it provides a starting point for the purposes of assessing the perimeter by separating cryptoassets into three categories: exchange tokens, utility tokens, and security tokens.

“We have committed to consult on perimeter guidance for security tokens- which already fall within the RAO [Regulated Activities Order] - in order to clarify the way regulation applies to them. In the interim we will continue to monitor for potential breaches by those carrying out regulated activities without the appropriate authorization,” the FCA said.

“The Government will consult next year in order to explore whether and how exchange tokens and the firms which provide them could be regulated.”

Commenting on the responses, Rt Hon. Nicky Morgan MP, Chair of the Treasury Committee, said:

“It is clear that the Government and the FCA share the Committee’s concerns on crypto-assets, including the lack of regulation, minimal consumer protection, and anonymity aiding money laundering.

“The decision by the Government and the FCA to hold a series of consultations about how to mitigate these risks is welcome. The Committee will keep a close eye on these consultations and will continue to press for regulation.”