To prevent the use of cryptoassets in illicit activities, authorities will take action in bringing all relevant firms into anti-money laundering regulation.
The crypto Taskforce has published its final report regarding cryptocurrencies. The Taskforce is a collaboration between HM Treasury, Bank of England and the Financial Conduct Authority (FCA). The group of financial bodies formed in March of this year to tackle the problems that come with the trading of crypto.
The report discusses the Taskforce’s opinion of cryptoassets which includes exchange tokens such as Bitcoin and distributed ledger technology (DLT) which includes blockchain.
The Taskforce finds that the UK cryptoasset market is not the biggest in the world but is fundamental to the growth in security. Cryptoassets need to be regulated for the UK to maintain its reputation as a safe place for business in financial services, it says.
Currently the bodies that form the Taskforce do not believe there is enough evidence that cryptoassets offer any benefits but there is potential for this to change in the future. DLT is said to be much more promising in its early stages of development, potentially offering benefits to financial services besides the crypto space which the Taskforce supports.
For the cryptoasset market to continue growing safely, action needs to be carried out to reduce the risks that the crypto community is exposed to. Risks including illicit activities such as money laundering, threats to financial stability and illegitimate development for both DLT and cryptoassets. The regulatory bodies will consult on implementing a global response to the use of cryptoassets in illicit activities.
Another highlighted risk is the growth of a derivatives market. Globally there is a concern that individuals are not informed of the potential risks they are exposed to when investing in cryptoassets, let alone a derivatives market for crypto. The introduction of derivates including Contract for Differences (CfDs) and futures can result in individuals losing more than their original investment. To manage this problem, the Taskforce will consult on preventing retail consumers from trading derivatives to reduce even more loss of capital.
The next step following this report will be a consultation in early 2019. This consultation will discuss how regulation can be effectively implemented to rectify the risks posed by exchange tokens.
The cryptoasset market has given a generally positive response to the report. Nigel Green, founder and CEO of financial advisor deVere Group, said he struggles to believe that cryptocurrencies are still considered ‘just a fad’.
Green said: “It’s becoming increasingly clear that cryptocurrencies are the future of money.
“The report’s proactive and pragmatic approach towards regulation of the burgeoning sector should be championed. It is a sector in which there is a clear need for a robust international regulatory framework and ongoing supervision in order to further protect both retail and institutional investors, as well as to help tackle illicit activity.”
30 May 2023
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