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The UK Treasury Committee today published a report in which it has called upon the regulation of the “Wild West” crypto-asset market.
The release of the report follows the launch of an inquiry into digital currencies and distributed ledger technology (DLT) by the Treasury in February this year.
According to the report, some key problems faced by the crypto market include volatile prices, hacking vulnerabilities, minimal consumer protection, and anonymity aiding money laundering. It said that crypto-assets have no inherent value and due to the absence of any market fundamentals, their prices fluctuate according to sentiment. This, in turn, exposes investors not only to larger potential gains but also correspondingly greater risk of loss.
“The use of blockchain as a payments system exacerbates these risks, since the exchange rate (vis-à-vis other crypto-assets, or conventional currency) can fluctuate significantly during the time it takes to settle a transaction,” it added.
The lawmakers said that the efforts by self-regulating bodies in the crypto-asset industry are insufficient as there are firms that will ignore the codes of conduct set out by them.
“Crypto-assets have been embedded in certain pockets of society and industry, and it is highly likely that they are here to stay. The UK Government and financial services regulators appear to be deciding whether they will allow the current “wild west” situation to continue, or whether they are going to introduce regulation. The current ambiguity surrounding the Government’s and the regulators’ positions is clearly not sustainable,” the report said.
On these lines, the report recommended that more powers should be given to the Financial Conduct Authority (FCA) to control how crypto-asset exchanges and Initial Coin Offering (ICOs) market their services.
It went to state that the “development of ICOs has exposed a regulatory loophole that is being exploited to the detriment of ordinary investors,” adding that the “Regulated Activities Order should be updated to bring ICOs within the FCA’s perimeter as a matter of urgency, and bring investor protections into line with those in the United States.”
