Solidifying regulation over the crypto-asset market in the United Kingdom may take up to two years to accomplish, this according to a press release from professional and legal services firm Reynolds Porter Chamberlain (RPC).
Regulating crypto
Due to the lengthy nature of creating, introducing and implementing even the most minor of regulatory changes and as such, Legal Director at RPC James Kaufmann has said that the two-year estimate is drawn from a “best-case scenario”.
Recently, regulatory proposals were put through the House of Commons Treasury Committee. On 19 September, the UK Treasury Committee published a report calling for the numerous risks associated with crypto-assets to be addressed, describing the present markets as a “Wild West”.
According to Kaufmann, time is of the essence when it comes to regulating virtual assets, which is especially challenging given the intricate nature of the nascent technology.
Kaufmann said, “Bringing a complex and fast-evolving area like cryptocurrencies into a regulatory framework is going to be a difficult and lengthy process. Added to this, big issues like Brexit are already occupying a lot of regulator’s time.”
Matter of time
The RPC press release makes the case that small regulatory changes to the present regime can take years. Offering an example, it describes a two-and-a-half year gap between the announcement of regulation plans and the implementation of such.
Kaufmann argues that even fast-tracked proposals from Members of Parliament (MPs) can still take years to implement within the UK cryptocurrency market. In turn, this creates a double-edged sword, with one side lacking in protections from retail participants, and the other stifling the UK’s cryptocurrency markets.
Agreeing with the “Wild West” Treasury Committee report, the RPC notes that those first to create workable regulations for virtual currencies are likely to be ahead of the pack and can begin to establish markets “needed” to freely trade such assets.
Action to be taken
The RPC lists three actions that need to be taken by the HM Treasury in order to regulate cryptocurrencies:
- Assess which specific activities related to cryptocurrencies need regulating perhaps with market study
- Draft proposed regulations open to consultation
- After the consultation period has closed, publish changes and set an implementation date
The RPC says that new regulations would expand the role and remit of the UK Financial Conduct Authority (FCS) “substantially”, and calls into question whether or not the FCA has “the capacity and funding” to manage such an expansion, if it has “requisite expertise” to regulate the sector and if the FCA prepared for the crypto market’s reaction to regulation.
At the end of the press release, Kaufmann describes the race to regulate cryptocurrencies as one that is “sure worth winning”, especially given the growing usage of the technology across the world.
He adds, “The creation of a cryptocurrency trading hub may also have positive knock-on effects for businesses serving these markets, such as brokers, investment banks, and custodians as well as a potential increase in tax revenues for authorities.”
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