The UK could become a global centre for crypto-assets if a regulatory framework was put in place, according to a report from the UK Treasury Committee.
The report stated that the government and financial services regulators appear to be deciding whether to introduce regulation to the market, or allow the current “Wild West” situation to continue.
It outlined that as crypto-assets and initial coin offerings (ICOs) are currently not within the scope of the Financial Conduct Authority’s (FCA) regulation, investors are at risk due to a lack of formal mechanisms for protection and redress.
Should the government decide to encourage the growth of crypto, the report said that the introduction of regulation could see positive outcomes, including a shift in the market towards a more mature business model and better investor protection.
“If the UK develops an appropriate and proportionate regulatory environment for crypto-assets and if future innovations in crypto-assets proved themselves as beneficial to society and industry, the UK could be well placed to become a global centre for this activity,” the report said.
The UK Treasury Committee recognised that several self-regulatory bodies, such as Crypto UK, have been established in the crypto-asset industry with best practice and code of conducts, but as they are voluntary it is likely many firms will ignore them.
“When industry is self-regulating, there is no authority to hold the industry to account,” the Committee said.
In response to the report, Crypto UK’s chair, Iqbal Gandham, welcomed the Treasury’s recommendations and urged the firm’s efforts to regulate crypto are matched by the government.
“Self-regulation by the industry was always intended to be a starting point – this must now be matched by government action,” Gandham said.
“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.”
The Treasury Committee concluded that introducing regulation of crypto-assets by extending the Regulated Activities Order would be the most efficient way of regulating crypto markets, as establishing an entirely new framework could take much longer.
“Designing a new framework of regulation would inevitably take much longer and given the growing risks surrounding crypto-assets and subsequent consumer detriment, the introduction of regulation should be treated as a matter of urgency.”