UK Lawmakers Call For Greater Oversight of Crypto Industry

Citing market volatility and consumer risk, the U.K. Treasury Committee called for increased regulation of the cryptocurrency space in a new report.

AccessTimeIconSep 19, 2018 at 4:00 a.m. UTC
Updated Aug 18, 2021 at 9:52 p.m. UTC

Presented By Icon

Election 2024 coverage presented by

Stand with crypto

A group of U.K. lawmakers has called for more oversight and regulation of the cryptocurrency industry in a new report published Wednesday.

Arguing that "crypto-assets have no inherent value," are "especially risky" for retail investors and are "particularly vulnerable to manipulation," the report states that "the introduction of regulation [to the cryptocurrency space] should be treated as a matter of urgency."

  • Bitcoin Mining in the U.S. Will Become 'a Lot More Decentralized': Core Scientific CEO
    13:18
    Bitcoin Mining in the U.S. Will Become 'a Lot More Decentralized': Core Scientific CEO
  • Binance to Discontinue Its Nigerian Naira Services After Government Scrutiny
    05:10
    Binance to Discontinue Its Nigerian Naira Services After Government Scrutiny
  • The first video of the year 2024
    04:07
    The first video of the year 2024
  • The last regression video of the year 3.67.0
    40:07
    The last regression video of the year 3.67.0
  • The report comes roughly seven months after the U.K. Treasury Committee first announced it would look into the benefits and risks of cryptocurrencies.

    The group wants to give the Financial Conduct Authority (FCA), the U.K.'s top financial regulator, more authority to regulate crypto markets. The report notes that organizers of initial coin offerings (ICOs), at present, can exploit certain loopholes to avoid scrutiny from the agency.

    "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," the report states.

    The lawmakers went on to add:

    "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."

    No stability risk

    The report highlighted the speculative interest in cryptocurrencies, noting that "in the absence of any market fundamentals, their prices fluctuate according to sentiment."

    As a result, cryptocurrencies are more volatile than other asset classes, which can result in either greater gains or a greater loss.

    "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 report added.

    That being said, the lawmakers argued that cryptocurrencies don't pose a threat to financial stability, primarily due to the small number of users and investors. They also noted that cryptocurrencies and blockchain can even be used positively – provided that they are regulated appropriately.

    As such, the report noted 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."

    British pounds image via Shutterstock

    Disclosure

    Please note that our privacy policy, terms of use, cookies, and do not sell my personal information have been updated.

    CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. CoinDesk has adopted a set of principles aimed at ensuring the integrity, editorial independence and freedom from bias of its publications. CoinDesk is part of the Bullish group, which owns and invests in digital asset businesses and digital assets. CoinDesk employees, including journalists, may receive Bullish group equity-based compensation. Bullish was incubated by technology investor Block.one.


    Learn more about Consensus 2024, CoinDesk's longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.