The cryptocurrency market is a “Wild West” that needs to be tamed by more regulation, according to a new report by the British Parliament’s Treasury committee.
The committee said Wednesday that the current “ambiguity of the U.K. Government and regulators’ position is clearly not sustainable.” However, it added, if the right regulations are introduced, the U.K. may be “well placed to become a global center for crypto-assets.”
“This unregulated industry leaves investors facing numerous risks,” said committee chair Nicky 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…At a minimum, regulation should address consumer protection and anti-money laundering.”
At the moment, the country’s Financial Conduct Authority does not have oversight of the cryptocurrency scene, nor of most initial coin offerings (ICO.) That means consumers have no formal way to get compensation in cases of scams, and companies offering ICOs are still able to get away with claiming in ads that the market can only go up.
What’s more, the committee complained, crypto-asset exchanges—the committee prefers this term to “cryptocurrencies” as the virtual coins are largely being used for speculation rather than trade—don’t fall under anti-money laundering (AML) regulations.
It has actually been three and a half years now since the British government said it wanted to extend its AML rules to cover Bitcoin and other cryptocurrencies. Since then, the EU has introduced a new law requiring member states to do this, but the Treasury committee noted Wednesday that the U.K. government is currently only due to achieve the extension of the rules by the end of 2019.
Here’s another of the committee’s complaints: “An additional risk that consumers may not be aware of is that some customers who have lost their passwords to a crypto-asset platform have been told by the firm that runs their account that their password cannot be restored. Thus, there is no recourse for customers who have lost their password, and they are locked out of their account permanently. This often-unexpected outcome for investors is a stark contrast against how customers of banks, and other regulated financial services firms, are treated.”
As for the idea of the U.K. becoming a global cryptocurrency trading hub, that would potentially represent the future-proofing of the City of London’s existing status as a financial center. The country would, however, need to fend off the similar ambitions of other countries, such as Switzerland, Malta and Israel.