July 31, 2019, | AtoZ Markets - UK’s Financial Conduct Authority said on Wednesday that bitcoin and altcoins have no intrinsic value and offer users few protections. However, added that such coins fall outside the scope of its powers.
In addition to that, the FCA also explained that the crypto markets were highly dysfunctional, with the burden on users to understand the risks associated with investing in unregulated assets.
In a statement, FCA said that: "A combination of market immaturity, volatility, and a lack of credible information or oversight raises concerns about market integrity, manipulation, and insider dealing within the crypto asset. markets."
Despite having all these faults, the FCA said the existing rules did not apply to bitcoin and other altcoins, and to trading platforms and exchange firms.
Crypto asset regulation guidelines for the UK
Nick Cook, FCA’s director of innovation quoted that the investment by British users in crypto is still fairly low as compared to other parts of the world. The FCA said its guidance will inform Britain's finance ministry as it looks at whether new laws are needed for cryptocurrencies.
The finance ministry said in an emailed comment that the guidance was welcome and that it was planning to consult on unregulated cryptocurrencies later this year. Retail investors across the world have been drawn to cryptocurrencies, highly volatile assets that unlike fiat money or other assets usually lack guarantees, because of their potential for quick gains.
Other proponents say digital coins could transform payments and how companies raise capital, though such examples are rare. The treatment of cryptocurrencies by regulators is in focus after Facebook unveiled plans for its Libra coin, sparking a backlash by politicians and regulators across the globe.
G7 finance ministers and central bankers said last month that Libra and other digital currencies raise serious concerns and must be regulated as tightly as possible to ensure they do not upset the world's financial system.
While the FCA did not mention Libra in its guidance, it said that some stablecoins like Libra, backed by assets such as fiat currencies could fall under its rules in certain circumstances.
The FCA could not say how Libra would be treated because its structure, design and operating model were still to be determined.
According to The FCA, other types of cryptocurrencies, such as security tokens that provide rights and obligations such as shares or units in funds were subject to rules. As such, firms issuing them would need authorization.
Regulators still in doubt regarding crypto regulations
Currently, cryptocurrencies are subject to a patchwork of rules that vary from country to country. Regulators in Britain, the European Union, and the United States have looked at how they can apply existing securities, anti-money laundering, and consumer protection rules before considering new regulation.
Others, such as China, have banned cryptocurrencies outright. An Indian government board last week recommended a similar measure.
A handful of smaller countries, from Belarus to Bahrain, have come up with specific laws for digital currencies. Their efforts might help shape the development of the global market and the growth of industry players, from exchange platforms to brokers.
The FCA said it would work closely with other national and international regulators to coordinate approaches. For now, said Bradley Rice, a lawyer at law firm Ashurst, there was little it could do within its existing powers.
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