Treasury committee report said the time has come for cryptocurrency regulation to begin.
The MPs stated that the current crypto industry’s “Wild West” raises investor vulnerability.
Regulating the “Wild West”
Cryptocurrencies such as Bitcoin, Litecoin, Ethereum, and Ripple are “Wild West” assets, according to MPs on the Treasury select committee. They stated that investors are exposed to a spectrum of risks and that the cryptocurrency industry is in dire need of regulation.
— Treasury Committee (@CommonsTreasury) September 19, 2018
The Treasury committee released a report on the subject, stating that crypto is leaving consumers unprotected due to its lack of regulation. Furthermore, it stated that this unregulated industry opens the door to money laundering, at the same time that regulators and the government itself “bumble along” without taking action.
An Unsustainable Situation
According to Committee Chair, Conservative MP Nicky Morgan, the current cryptocurrency situation is not sustainable.
“Bitcoin and other crypto-assets exist in the wild west industry of crypto-assets. This unregulated industry leaves investors facing numerous risks,” stated Morgan. “Given the high price volatility, the hacking vulnerability of exchanges and the potential role in money laundering, the Treasury committee strongly believes that regulation should be introduced.”
Unregulated Digital Currency
Cryptocurrencies are not regulated by any of the traditional central banks or national governments as is the case with traditional currencies. They are not covered by the Financial Conduct Authority (FCA) or the City regulator. At the moment, the industry lacks formal methods for investor compensation or consumer redress.
According to the Treasury committee report, at a bare minimum, cryptocurrency regulation should be introduced for money laundering prevention and for consumer protection. It stated that the current situation shows such great volatility in the price of crypto-assets that while there is significant opportunity for great potential gain, the case remains the same for possible losses. “Accordingly, investors should be prepared to lose all their money,” said the committee.
Protecting Investors and Consumers
“We set up the joint Cryptoassets Taskforce earlier this year because we want to better understand the potential risks and benefits of crypto-assets to people, businesses, and the economy,” said a spokesperson for the Treasury.
“The FCA agrees with the committee’s conclusion that bitcoin and similar crypto-assets are ill-suited to retail investors, and as we have warned in the past, investors in this type of crypto-asset should be prepared to lose all their money,” said the FCA about the Treasury committee report.