Aziza Project supports UK legislators call for new regulation to end ‘wild west’ crypto excesses
Updated: Sep 25, 2018
Cryptocurrencies such as Bitcoin and Ethereum are ‘wild west’ assets that expose investors to a litany of risks and must be regulated, the UK Parliament’s long-awaited Treasury Select Committee report into the crypto industry said last week.
In a move which will be widely applauded by the mainstream crypto community, the Treasury called for an end to the situation in which regulators stand on the side lines – leaving crypto assets in a regulatory no-man’s land – which would help make cryptocurrencies part of established finance, boosting the sector as a result.
The mainstream crypto community has long advocated expanding the regulatory landscape to embrace the cryptocurrency and blockchain sectors as this would help investors differentiate bone fide operators from scammers and fraudsters.
"Regulators have an unenviable task on their hands. Just keeping up with this highly innovative new industry is a challenge. However it's vitally important that regulators do get the balance right in protecting investors and not stifling the incredible potential for change that this space offers, says Robert Pyke, Aziza Project CEO.
...it's vitally important that regulators do get the balance right in protecting investors and not stifling the incredible potential for change that this space offers.
The Treasury report said that consumers were currently left unprotected from an unregulated industry that risked facilitating money laundering, while government regulators “bumble along” and fail to take action.
The Treasury report is widely seen as the precursor to new financial legislation. The next step would be for the government to submit a bill to Parliament seeking to regulate the cryptocurrency and blockchain sector.
Crypto-assets not covered by regulators
At present, crypto assets are not covered by the UK regulator, the Financial Conduct Authority (FCA), or by the US regulator, the Securities and Exchange Commission (SEC). But regulation is looming on both sides of the Atlantic, and the UK Treasury report is seen as confirmation that regulation is finally on its way.
The report concludes: “Regulation [is] needed for the…crypto-asset market” and that the “ambiguity of the UK Government and regulators’ position is clearly not sustainable.” However, it added that if the sector were regulated, the industry could present a considerable economic opportunity for Britain.
The Treasury report said that as a minimum, regulation should be introduced to boost consumer protection, and counter the threat of money laundering. It added that as things stood, the price of crypto-assets was so volatile that while potential gains were large, so were potential losses. “Accordingly, investors should be prepared to lose all their money,” it added.
Treasury recommendations endorsed
Endorsing the recommendations of the Treasury report, the FCA added: “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.”
In 2017, the price of Bitcoin surged more than 900% to reach a peak of almost $20,000 (£15,000) in December before falling precipitously to around $6,270 in September.
The digital currency first appeared in the wake of the 2008 financial crash, and was driven by crypto and blockchain evangelists seeking a way of bypassing the banking system and its related payments and settlements system.
The Treasury report added that not only were cryptocurrency exchanges at increased risk of cyber-attacks, but some retail investors who lost their passwords had found themselves locked out of the accounts permanently.
Governments fear that the crypto market may be too sophisticated for most retail investors, many of whom need enhanced protection from financial regulators.
Robert Pyke is of the view that sensible regulation and the advancement of security tokens can provide a more robust framework for retail investors and can bridge the chasm to institutional investors. "In our efforts to be a compliant security token, we went to great lengths to understand various jurisdictional standards. It took a long time because we wanted to do it right," says Pyke.
Sensible regulation and the advancement of security tokens can provide a more robust framework for retail investors and
CryptoUK, which represents a number of cryptocurrency companies with operations in the UK, said: “As an industry, we have been calling for the introduction of appropriate regulation to improve standards and encourage growth,”
It added: “Self-regulation by the industry was always intended to be a starting point. This must now be matched by government action.”