The United Kingdom’s cryptocurrency regulation is slowly taking shape as its Financial Conduct Authority (FCA) has announced that they will be analyzing the risks and benefits of blockchain technology and cryptocurrencies.
Regulation in the UK
The FCA, Bank of England and the UK Treasury are working together on a discussion paper for cryptocurrencies which will be revealed in 2019. The coming UK crypto regulations are geared toward attracting businesses based in Continental Europe.
The FCA Business Plan 2018/19 states:
“Cryptocurrencies has been an area of increasing interest for markets and regulators globally. In the UK, the Treasury Committee has announced that it will be launching an enquiry, to which we intend to respond.”
The plan continues:
“Cryptocurrencies themselves (i.e. those designed primarily as a means of payment/exchange) are not currently within our regulatory perimeter. However, some models of use or packaging cryptocurrencies bring them within our perimeter, making the landscape complex.”
Regulation around the world
The FCA has previously warned consumers regarding the risks of initial coin offerings (ICOs). The popular crowdfunding method for blockchain startups has been part of a miasma of controversies causing ICO bans in countries like China, which is still having issues with ICO and cryptocurrency projects getting past the Peoples Bank of China’s (PBoC) strict rulings.
There are very few countries around the world that have outright bans on ICOs, and many of the governments within their respective countries are taking a look at the possibility of future regulations.
Most countries have banned ICOs due to fraudulent actors, scams, security risks and money laundering; however, several are attempting to create definitions and legal frameworks that can accommodate the technology and utilize the long list of benefits that come with it.
Protecting consumers and the technology
In February, the UK Treasury Committee launched an inquiry into cryptocurrencies and distributed ledger technology, stating that one of its goals is to provide protection to consumers and businesses without stifling innovation. MP Nicky Morgan, committee chairman, said:
“People are becoming increasingly aware of cryptocurrencies such as Bitcoin, but they may not be aware that they are currently unregulated in the UK, and that there is no protection for individual investors… We will also examine the potential benefits of cryptocurrencies and the technology underpinning them, how they can create innovative opportunities, and to what extent they could disrupt the economy and replace traditional means of payment.”
The FCA also released a statement in response to the UK’s growing number of cryptocurrency and blockchain firms describing that cryptocurrency derivatives could be classed as financial instruments, meaning that tokens issued through ICOs could require FCA authorization.
While the FCA doesn’t quite have a clear idea on how to manage or regulate cryptocurrencies and ICOs, it is evident that the regulator intends to embrace distributed ledger technology and, in doing so, enable blockchain-related businesses and innovations to thrive in the UK.