UK financial watchdogs have outlined proposals to adopt a range of measures to bring cryptoassets into the regulatory fold. The UK Government's Cryptoasset Taskforce, comprised of the Bank of England, the Financial Conduct Authority and the Treasury was set up last March to consider the policy and regulatory implications of distributed ledger technology and the booming market for cryptocurrencies. While earlier reports on DLT were generally positive, the FCA has adopted a more bearish tone on cryptoassets in its final report, stating: "The FCA has made clear that in its view cryptoassets have no intrinsic value and investors should therefore be prepared to lose all the value they have put in. "Whilst the Taskforce appreciates that cryptoassets have the potential to bring benefits to markets, firms and consumers, there remains considerable risks that HMT, the Bank of England and the FCA will take action to mitigate." The final report sets out a range of proposals to bring the free-wheeling world of cryptocurrency activity under the regulatory bonnet. The Taskforce has committed to a number of actions, including consulting on: The proposal are likely to dampen the uptake of Initial Coin Offerings in the short-term while investors await the regulatory shakedown. The ban on retail uptake of crypto derivatives is also eye-catching and described by Lorraine Johnston, regulatory counsel at law firm Ashurst "like using a sledgehammer to crack a nut. Retail CFD providers are already subject to Esma's product intervention powers. Banning crypto derivatives will merely force customers to unregulated exchanges, where they have no regulatory protections whatsoever". Nonetheless, the imminent arrival of some regulatory clarity in the cryptoasset space was welcomed trade association CryptoUK: “We are pleased that today’s report announces a Treasury consultation on bringing cryptoassets within the regulatory perimeter of the FCA. We have consistently argued that this is the simplest and most effective way to introduce regulation. In taking forward these plans, it is important that new rules are proportionate and do not excess put up excessive barriers, including for retail investors."
The UK government’s Cryptoasset Taskforce has submitted proposed measures for bringing cryptocurrencies and distributed ledger technology into the regulatory framework. In a report published today, it outlines how to regulate digital assets in order to protect consumers from fraud, money laundering and other risks. It has committed to establishing which crypto-assets come in the existing regulatory perimeter, and whether this needs adjusting for ones with similar features to specified investments, by the end of 2018. A consultation on prohibiting related derivatives is planned for Q1 2019, while dealing with illegal use of crypto-assets is of high priority.