A treasury committee of members of parliament (MPs) in the house of commons has called for a resolution to issues surrounding digital currency, including listing price volatility, poor consumer protection, the risk of hacker attacks, and money laundering. The Committee also urged the Financial Conduct Authority (FCA) to supervise cryptocurrencies, which at present cannot regulate either issuers of digital assets or cryptocurrency exchanges.

Bumbling along

Nicky Morgan, the chair of the Treasury Committee, said ‘it's unsustainable for the government and regulators to bumble along issuing feeble warnings to potential investors, yet refrain from acting.’ Ms Morgan added that regulation should at least address the problem of consumer protection and anti-money laundering (AML). The Treasury Committee stated, ‘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.’ CryptoUK, set up in February as a self-regulatory body for the crypto-currency industry, said it welcomed the Treasury Committee's recommendations, ‘self-regulation by the industry was always intended to be a starting point, this must now be matched by government action’ chair Iqbal Gandham said.

How far?

European finance ministers have agreed not to rush further regulate the crypto-currency market, and await the outcome of a thorough analysis by European authorities before deciding on any steps, agreeing that crypto-assets don’t currently threaten the financial system. Irish finance minister Paschal Donohoe said, ‘the EU will be acting carefully in this area.’ Simmons & Simmons partner George Morris notes, ‘from a legal perspective the Treasury Committee’s report is hugely welcome in terms of providing some clarity on the regulatory direction for crypto assets within the UK.  The report is well judged in terms of seeking to strike a balance between controlling the more questionable practices in the market, but without suggesting that the market should be so heavy regulated as to be effectively shut down.  What is crucial now is to see the proposals on how the Regulated Activities Order will be amended so that the market can see how regulation is intended to be applied, and how far it will go.’