Lawmakers call for introducing UK crypto regulations, arguing that “the introduction of regulation [to the cryptocurrency space] should be treated as a matter of urgency.”
19 September, AtoZ Markets – A group of the UK lawmakers has reportedly called for better oversight and regulation of the cryptocurrency sector. The new report from the British authorities was published today.
Lawmakers Call for Introducing UK Crypto Regulations
In the report, the UK officials argued that “crypto-assets have no inherent value,” are “especially risky” for retail investors and are “particularly vulnerable to manipulation.” The report also noted that “the introduction of regulation [to the cryptocurrency space] should be treated as a matter of urgency.”
The recent report emerges approximately seven months after the UK Treasury Committee has announced its intentions to look into the risks and benefits of cryptocurrencies. Lawmakers want to provide the financial regulator of the UK markets, the Financial Conduct Authority (FCA), with more authority to regulate cryptocurrency markets. The report notes that organizers of initial coin offerings (ICOs) presently are able to exploit particular loopholes to avoid scrutiny from the FCA.
The report further states:
“Apart from drawing attention to the risks, there is little the FCA can do to protect individuals from being defrauded or losing their money. This is because most ICOs do not promise financial returns, but instead offer future access to a service or utility, meaning they fall outside the regulatory perimeter.”
Cryptocurrencies do not pose a threat to financial stability
Following on this, lawmakers wrote in the report:
“While there may be no explicit promise of financial returns, investors in ICOs clearly expect them: they are not buying tokens to gain access to as-yet unbuilt theme parks, or to obtain dental services in years to come, but in the hope of selling them at a profit. The development of ICOs has exposed a regulatory loophole that is being exploited to the detriment of ordinary investors.”
The report further stresses the speculative interest in digital currencies, adding that “in the absence of any market fundamentals, their prices fluctuate according to sentiment.”
Consequently, cryptocurrencies are more volatile when compared to other assets. This can result in greater gains and losses, as well, the report notes. It reads:
“The use of blockchain as a payments system exacerbates these risks since the exchange rate (vis-à-vis other crypto-assets, or conventional currency) can fluctuate significantly during the time it takes to settle a transaction.”
The lawmakers also argued that cryptocurrencies do not pose a threat to financial stability. This is due to fact that the market features a small number of investors and users, as of the moment. They also highlighted that cryptocurrency and Blockchain can be used in a positive way in case they are properly regulated.
The report mentioned that “if the government decides that growth is to be encouraged, the committee believes that the introduction of regulation could lead to positive outcomes for the crypto-asset market.”
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