Can crypto body tread P2P’s path to regulation?

CryptoUK, a self-regulatory body of cryptocurrency trading and investment platforms, is calling on government to make investing in the sector a regulated activity.

Launched earlier this year, CryptoUK is made in the image of the Peer-to-Peer Finance Association, the industry body formed by P2P lenders to lobby for industry-specific regulation in 2011. CryptoUK boasts eight members at present: BlockEx, CEX.IO, Coinbase, Coinfloor, CoinShares, CommerceBlock, CryptoCompare, eToro.

This morning, the Treasury Select Committee is conducting an inquiry into digital currencies. CryptoUK has put forward its proposals as a written response to the inquiry.

The trade body has based its ideas on ‘parallel examples’ with peer-to-peer finance firms. Its submission described Article 36H as an excellent example of regulators and industry collaborating to establish a progressive regulatory environment, and calls for a similar approach to be adopted in the UK cryptocurrency market.*

CryptoUK’s proposals include focusing regulation on platforms that facilitate interactions between digital currencies and fiat – rather than on the currencies themselves. Of course, this focus suits the group's membership.

The blueprint suggests HM Treasury use its power to grant the FCA new permissions to govern crypto investment. It also suggests that ‘Crypto-Licences’ should be bestowed on approved platforms, with approval dependent on adequate appropriateness checks on investors, anti-money laundering rules and operational standards.

“Introducing a requirement for the FCA to regulate the “on-off” ramps between crypto and fiat currencies is well within the remit of HM Treasury,” said Iqbal V Gandham, chair of CryptoUK and managing director at eToro. “Based on our analysis, this could be achieved relatively easily, without the need for primary legislation, and would have a huge impact, both in reducing consumer risk and improving industry standards.”

He added that the proposed approach is 'already working well' in Japan and Gibraltar.

*This article originally included an extract from the submission, but CryptoUK asked for this to be removed.