The UK’s financial regulator will unveil its guidelines on cryptocurrency policy later this year, which could have global repercussions for how virtual currencies like bitcoin are regulated.
The Financial Conduct Authority (FCA) announced on Monday that it is working with the Bank of England and the UK Treasury on a discussion paper for cryptocurrencies.
“Cryptocurrencies has been an area of increasing interest for markets and regulators globally,” the FCA’s 2018 business plan stated.
“In the UK, the Treasury Committee has announced that it will be launching an enquiry, to which we intend to respond.”
The FCA does not have any regulatory scope over cryptocurrencies, however its report could have an impact on future regulation. The body has previously issued consumer warnings on the risks involved with initial coin offerings (ICOs) - the process of crowdfunding new cryptocurrencies.
Such risks were highlighted last week after the Securities and Exchange Commission in the US charged two men over a potentially fraudulent ICO that had been publicized by the boxer Floyd Mayweather.
Some within the cryptocurrency space are against regulation, however analysts believe it could give the UK a competitive advantage.
“Ultimately, the FCA is trying to develop a coherent strategy for dealing with the issues and risks that cryptocurrencies raise,” said Jacob Ghanty, a financial regulatory partner at UK law firm Kemp Little.
“[Discussion papers] sometimes - but don’t inevitably - result in consultations, which in turn to rules being made. At a high level, there is pressure on the UK authorities to develop a comprehensive strategy towards crypto, as sooner or later the EU will develop its own approach meaning there will need to be compelling reasons for crypto firms to locate in the UK.”
The UK’s Treasury Committee launched an inquiry into cryptocurrencies and blockchain technology in February, stating that one goal of the investigation was to provide adequate protection for consumers and businesses without stifling innovation.
“People are becoming increasingly aware of cryptocurrencies, such as bitcoin,” Nicky Morgan, a member of parliament and Chair of the Treasury Committee, said at the time. “But they may not be aware that they are currently unregulated in the UK, and that there is no protection for individual investors.”
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