Financial Conduct Authority will, together with others as part of a task force, develop thinking and publish a discussion paper in the third quarter about the way to go in regulating cryptocurrencies. Companies are already starting to think about self-regulation even as the regulator warns that they must observe the regulation handbook.
Financial Conduct Authority (FCA) in Britain will publish a review about cryptocurrencies in the third quarter of the year even as it said the cryptocurrencies themselves do not fall under its regulatory remit but their use does.
It will, together with the Bank of England and the Treasury “develop thinking and publish a discussion paper” about policies relating to cryptocurrencies.
In the meantime, companies currently dealing with crypto in the jurisdiction will not need to observe any regulations. FCA said such firms –including those offering crypto derivatives — require meeting all relevant rules as required in the FCA‘s handbook. Otherwise, they will face sanctions.
The announcement comes even as the regulator struggles with inadequate resources due to Brexit. FSA highlighted the areas it will study but said there will be stretching of resources in order to deal the financial sector impacts of Britain’s pullout from European Union next year.
The regulator’s budget is around 518.2 million pounds but 30 million pounds ($42 million) will be used to deal with Brexit.
As a result of having restrained resources verses in the dealing with Brexit, they performed a rigorous level of scrutiny and challenge to focus on areas where there could be the greatest potential for harm. It said it will monitor negotiations’ progress and potential for further impacts on the cost of withdrawal.
The announcement about crypto regulation also comes even as regulators around the world look for how to deal with cryptocurrencies. Some have working regulatory frameworks and policies in place to provide for taxation and KYC mainly, but many others are yet to.
Many other regulators are said to be working on regulations and policies to control crypto dealings.
Linking up for self-regulation
In the past, development of crypto regulations involved regulators saying criminals are using crypto to launder money. UK Treasury said it aimed at regulating Bitcoin as part of a broader plan by EU under negotiation.
Seven crypto companies set up, in February, UK’s first largest crypto trade association CryptoUK, with motives of self-regulation. The move would help improve legitimacy and transparency as regulators weigh on new regulations and clamp-downs.
The group includes UK-based trading platform Etoro and exchange Coinbase. They even have a code of conduct for members, which they expect will be a blueprint for future UK regulations.
Development of regulations also includes EU regulators such as European Securities and Markets Authority. And the European Banking Authority and the European Insurance and Occupational Pensions Authority. Thus warning investors against high risks of trading in cryptocurrencies.
They said there were “clear signs of a pricing bubble,” options to exit the market and lack of consumer protection.
A research fellow at the University of Cambridge and Bitcoin expert Dr. Garrick Hileman said announcements of a possibility of regulating Bitcoin. However, had powerful signaling effect puts the industry on a notice that regulators are concerned. And would finally motivate companies to look to self-policing the bad actors.