LONDON (Reuters) – The British cryptocurrency market resembles the Wild West and should be regulated, lawmakers said today, urging the government to bring in its heel a sector beset by volatile price swings, hacking vulnerabilities and weak consumer protection.
PHOTO FILE: A cryptocurrency mining computer is seen in front of the bitcoin logo during the annual Computex computer fair in Taipei, Taiwan, 5 June 2018. REUTERS / Tyrone Siu / File Photo
The current approach of the government to the industry is vague and unsustainable, the Parliament's Treasury Committee has stated in a report, calling for regulation that protects consumers and prevents illicit uses such as money laundering.
However, Britain could become a global center for cryptocurrencies with proportionate regulation, he said, adding that the government should consider whether it could encourage the growth of the industry against its many risks.
Cryptocurrencies are virtual tokens that can be used as forms of payment. They can also be exchanged on online exchanges, a use that has become widespread.
Although the Financial Conduct Authority, the control body of Great Britain, has issued warnings against scams involving cryptocurrencies, the lack of a full set of rules has aroused strong criticism from legislators.
"It is unsustainable for the government and the bumble regulatory authorities along the issue of weak warnings to potential investors, but to refrain from acting," said Nicky Morgan, chairman of the committee.
Extending the existing laws to cover cryptocurrency trade and early coin bidding would be the fastest way to ensure supervision by industry regulators, the report said.
STRIKING A BALANCE
CryptoUK, an industrial body, welcomed the recommendations.
The government should "introduce regulation that strikes the right balance between the creation of safeguards and the possibility for the UK to become the global leader in cryptography," said Iqbal Gandham, president.
The cryptocurrencies recorded an increase in interest last year, especially by individual investors. The price of bitcoin, the best-known cryptocurrency, has risen by more than 1,300 percent in 2017 to reach a record level of nearly $ 20,000, but has since collapsed. Tuesday was trading around $ 6,370.
Policy makers around the world are discussing how to deal with cryptocurrencies and their underlying blockchain technology, stating that proponents have the potential to transform industries like finance and insurance.
However, few major jurisdictions have seriously examined how to regulate digital money, despite a series of trade-related thefts and concerns that cryptocurrencies allow crime.
Japan last year became the first country to oversee the cryptocurrency trade at the national level, with the aim of taming an unruly sector and exploiting the growth potential of the sector. Others, including China and South Korea, have blocked cryptocurrencies.
In contrast, Western states have undertaken few concrete actions. US securities regulators have stepped up their control, noting that cryptocurrencies could be considered as securities and as such subject to federal laws.
The EU has so far avoided regulation due to the relatively small size of the industry, although a report prepared for the blockade this month said it should adopt common rules on cryptocurrencies.
Report by Tom Wilson; Editing by Gareth Jones