Treasury committee urges regulation of UK’s ‘wild west’ crypto market
The UK government has been warned that Britain’s cryptocurrency market resembles the “wild west” and must be regulated to protect investors from sharp price swings, manipulation and fraud.
MPs on the Treasury Select Committee published their report on Wednesday – among the key findings was the conclusion that the “ambiguity of the UK government and regulators was clearly not sustainable”.
Crypto assets in the UK and most initial coin offerings (ICOs) are not currently within the regulatory scope of Financial Conduct Authority (FCA) – Britain’s main market regulator.
“Crypto investors are currently afforded very little protection from the litany of risks, namely there are no formal mechanisms for consumer redress or compensation,” the Committee said.
This “litany” of risks included, the report said, volatile prices, hacking vulnerabilities, minimal consumer protection and anonymity that aids money laundering.
While it acknowledged the existence of self-regulatory bodies within the UK that set out codes of conduct and best practice guidelines, it said “inevitably, there are firms that will ignore them, which is clearly insufficient”.
It added: “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.
“The Committee strongly believes that regulation should be introduced. At a minimum, regulation should address consumer protection and Anti-Money Laundering (AML).”
Attention was also drawn to the advertising of ICOs and crypto exchanges, which also remains unregulated by the FCA. One-sided adverts imply that the crypto-asset market will only go up, the report said.
“The FCA’s consumer warnings are a feeble corrective to such misleading adverts. The regulator needs more power to control how crypto-asset exchanges and ICOs market their services,” the Committee said.
It concluded, however, that the regulatory approach should be considered carefully to assess whether cryptocurrency growth should be encouraged to improve liquidity and lead to a more mature market.
Committee chair Nicky Morgan MP, said: “If the Government decides that crypto-asset growth should be encouraged, appropriate and proportionate regulation could see the UK become a global centre for this activity.”