UK Treasury Committee urges regulation for ‘Wild West’ crypto-assets
‘Wild West’ crypto-assets should be regulated according to the UK Treasury Committee which has published a unanimously-agreed report on crypto-assets for its Digital Currencies inquiry.
The report finds that problems include volatile prices, hacking vulnerabilities, minimal consumer protection, and anonymity aiding money laundering. At a minimum, regulation should address consumer protection and Anti-Money Laundering (AML), the committee says.
Blockchain is deemed currently slow, costly and energy-intensive, but there is potential for data storage uses.
The report says: “There are a number of examples of blockchain being deployed in the financial services industry and supply chain management. The Committee is supportive of good innovation, but notes that blockchain should not be pursued for its own sake. Rather, Government and industry should identify what problems exist and consider whether blockchain offers the most appropriate solution. The Committee recognises that blockchain technology may have the potential to solve problems caused by a lack of trust in data integrity and may be a more efficient method of managing certain types of data in the long term, offering higher levels of security than centralised databases.
“However, at present – although small scale uses for blockchain may exist – the Committee has not been presented with any evidence to suggest that universal applications of the technology are currently reliably operational.”
The report also found that the ambiguity of the UK Government and regulators' position is clearly not sustainable and that regulation could improve customer outcomes, enable sustainable growth, and reduce certain risks.
In deciding the regulatory approach, Government should decide if growth should be encouraged, the report says, as proportionate regulation could see the UK as well placed to become a global centre for crypto-assets.
The price volatility of crypto-assets concerned the Committee. The report says: “For example, the price of a Bitcoin increased from USD6,472 in November 2017 to USD17,629 in December 2017, and fell to USD7,208 in February 2018. Investors are exposed to large potential gains, but correspondingly a greater risk of loss. Accordingly, investors should be prepared to lose all their money.”
Commenting on the Report, Rt Hon Nicky Morgan MP, Chair of the Treasury Committee, said: "Bitcoin and other crypto-assets exist in the Wild West industry of crypto-assets. This unregulated industry leaves investors facing numerous risks. Given the high price volatility, the hacking vulnerability of exchanges and the potential role in money laundering, the Treasury Committee strongly believes that regulation should be introduced.
“It's unsustainable for the Government and regulators to bumble along issuing feeble warnings to potential investors, yet refrain from acting.
“At a minimum, regulation should address consumer protection and anti-money laundering. 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."