In a report published today (June 5), the crypto and digital assets all-party parliamentary group said the government should appoint a ‘crypto tsar’ to co-ordinate its response across departments to regulating crypto, digital assets and blockchain.
The report, which contained 53 recommendations for government after its inquiry into the sector, said crypto is “here to stay” and must be regulated to protect consumers.
The growth of the sector without regulation presents big risks to consumers in terms of economic crime and financial stability, the group said.
“Cryptocurrency and digital assets are best regulated within existing and new financial services regulations, which has a track record in mitigating risks to consumers and investors,” the report said.
The 15 MPs and members of the House of Lords said there is a “finite window of opportunity” within the next 18 months to ensure early leadership in the sector, and although the UK is well placed to take advantage of these opportunities, it will take cross-governmental planning to make this happen.
The group was formed in response to growing interest and scrutiny of the sector in parliament, and aims to allow policymakers to better understand the sector and the UK government’s target of the country becoming the global hub for cryptocurrency investment.
Lisa Cameron, chair of the group, said: “Given the rapid growth of cryptocurrency and digital assets, the timing of this report is vital to protect consumers whilst ensuring the UK’s leadership in this sector can be realised.”
The report’s release comes amid disagreement on the best way to tackle crypto regulation.
Last month, the Treasury committee called for the government to regulate consumer trading in unbacked crypto assets as gambling.
Weeks later, the International Organisation of Securities Commissions, the global regulatory watchdog, said it is time to end the regulatory arbitrage over crypto assets as it proposed a plan of how jurisdictions should regulate crypto assets.
The sector has seen a number of scandals in recent years, including the “crypto winter”, a period of weakness in the value of crypto, and the collapse of crypto exchange FTX.
Cryptocurrency is not currently regulated by the FCA, though digital asset service providers that operate in the UK must go through the regulator’s anti-money-laundering review process.
Earlier this year, the FCA released a consultation on its proposed approach for regulating crypto technologies, which would bring centralised crypto exchanges into financial services regulation for the first time, as well as other core activities like custody and lending.
But there are concerns that regulating crypto will lead to a ‘halo effect’, leasing consumers to erroneously believe that crypto trading is safe and protected.
sally.hickey@ft.com
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