UK: A Step Towards UK Crypto-Asset Regulation? Treasury Committee Report Finds Current Status “Clearly Not Sustainable”

share save 171 16 - UK: A Step Towards UK Crypto-Asset Regulation? Treasury Committee Report Finds Current Status "Clearly Not Sustainable"

Squire Patton Boggs LLP | Katherine Wakeham and Chris Webber | Oct 30, 2018

UK considering crypto regulations - UK: A Step Towards UK Crypto-Asset Regulation? Treasury Committee Report Finds Current Status "Clearly Not Sustainable"Last month, the House of Commons Treasury Committee published its report on crypto-assets. The report expresses serious concerns about the risks of consumer harm and financial crime and calls for regulation “as a matter of urgency“.

Crypto-assets?

It is striking that the Committee did not consider it appropriate to refer to "crypto-currencies" in the current landscape. They felt that these assets were failing to perform key functions of a currency, because:

  • The price volatility of such assets meant they were not a good store of value. The Bank of England gave evidence that Bitcoin is 10x more volatile than sterling against the US dollar. Other crypto-assets showed even greater fluctuations.
  • There was insufficient market liquidity and capacity for these assets to act as a medium of exchange. The Committee noted evidence that the blockchains for some crypto-assets were struggling to handle current payment volumes, leading to higher transaction fees and/or delays in executing transactions. The transaction fees were exacerbated by the higher energy costs of blockchain's decentralised system.
  • There were no crypto-assets being routinely or widely used as a unit of account. Even Bitcoin is not widely accepted.

The term "crypto-assets" was preferred.

See:  SEC Launches Fintech Hub To Engage With Cryptocurrency Startups And More

The Committee's conclusions

The Committee acknowledged some of the advantages and opportunities of crypto-asset and distributed ledger technology. But it found there were interlinking limitations. In particular:

  • The same reasons crypto-assets could not be termed 'cryptocurrencies' also put a limit on the extent to which they were capable of replacing traditional payments systems.
  • The price volatility made crypto-assets "especially risky, particularly for inexperienced retail investors".
  • The Committee looked at the hacking of exchanges, noting a lack of compensation scheme or arrangements put in place by the exchanges themselves. The Committee considered that "The risk of hacking associated with crypto-assets may not be something investors in conventional assets have experience of... they may not be well placed to judge this risk."
  • the Report notes that Initial Coin Offerings (ICOs) have "exposed a regulatory loophole that is being exploited to the detriment of ordinary investors." Although ICOs may be structured to fall outside the existing regulation, investors were clearly expecting financial returns in a similar manner to regulated investments.
  • The Committee noted suspicions that crypto-exchanges are being used to facilitate money laundering and terrorist financing, since they enable anonymous transacting. The Report acknowledged conflicting views on how significant this criminal use is. The Fifth Anti-Money Laundering Directive will bring crypto-exchanges within the money laundering regulations by 10 January 2020, but the Committee urges the UK Government to implement the regulations more promptly.

Some limitations identified by the Committee are inherent. Others could be reduced and/or eliminated by effective regulation. Presently, the FCA has no powers to regulate crypto-assets themselves and only limited scope to regulate ICOs. This limits the FCA to issuing warnings drawing attention to the risks investors in these products face. The Report considered such warnings "a feeble corrective to advertisements...that only emphasise the upside opportunities of crypto-asset investing". This led the Committee to conclude that:

"Given the scale and variety of consumer detriment, the potential role of crypto-assets in money laundering and the inadequacy of self-regulation, the Committee strongly believes that regulation should be introduced. At a minimum regulation should address consumer protection and money laundering."

See:  Exploring cryptoasset regulation

What might regulation look like?

There is currently a level of self-regulation within the industry, but the Committee considered this insufficient. The Committee's recommended that in the first instance "The Regulated Activities Order should be updated to bring ICOs within the FCA's perimeter… and bring investor protections into line with those in the United States", where the Securities and Exchange Commission generally treats utility token issues as within existing securities laws. The Committee considered that this:

"...would be the quickest method of providing the FCA with the necessary legal powers to execute its duties of protecting consumers and maintaining market integrity. Designing a new framework of regulation would inevitably take much longer and given the growing risks surrounding crypto-assets and subsequent consumer detriment, the introduction of regulation should be treated as a matter of urgency."

The Committee suggested that regulation should include, at least, issuing ICOs and providing crypto exchange services.

The Committee also considered that, whilst there didn't appear to be a significant risk to market stability caused by crypto-assets, the Bank of England and FCA should continue to monitor this risk.

Continue to the full article --> here


NCFA Jan 2018 resize - UK: A Step Towards UK Crypto-Asset Regulation? Treasury Committee Report Finds Current Status "Clearly Not Sustainable" The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

Latest news - UK: A Step Towards UK Crypto-Asset Regulation? Treasury Committee Report Finds Current Status "Clearly Not Sustainable"FF Logo 400 v3 - UK: A Step Towards UK Crypto-Asset Regulation? Treasury Committee Report Finds Current Status "Clearly Not Sustainable"community social impact - UK: A Step Towards UK Crypto-Asset Regulation? Treasury Committee Report Finds Current Status "Clearly Not Sustainable"
NCFA COVID 19 letter to government to support Fintechs and SMEs - UK: A Step Towards UK Crypto-Asset Regulation? Treasury Committee Report Finds Current Status "Clearly Not Sustainable"

Coronavirus resources 800 1 - UK: A Step Towards UK Crypto-Asset Regulation? Treasury Committee Report Finds Current Status "Clearly Not Sustainable"

NCFA Newsletter subscribe600 - UK: A Step Towards UK Crypto-Asset Regulation? Treasury Committee Report Finds Current Status "Clearly Not Sustainable"

FFCON20 Homepage Banner v3 updated - UK: A Step Towards UK Crypto-Asset Regulation? Treasury Committee Report Finds Current Status "Clearly Not Sustainable"

Forbes | Randall Lane | May 26, 2020 In a matter of weeks, Covid-19 spurred seismic shifts in how we work, learn and transact, and it helped usher in a new era that is smarter and fairer. The surreal year 2020 produces a personal Groundhog Day effect. The clock moves at one-quarter speed as the time-numbing diversions and necessities of a century ago, from jigsaw puzzles to yeast, fly off the virtual shelves. Simultaneously, though, the world is transforming at a pace unlike any experienced since World War II. In a matter of weeks, seismic, permanent shifts have occurred in how we work, learn and transact. The most significant shift is taking place in our economic system itself. See:  OpEd: IT’S TIME TO BUILD Capitalism, the greatest engine for prosperity and innovation ever created, was already under strain before the coronavirus pandemic. Despite a decade of impressive economic growth and job creation, a plurality of Americans still reported feeling as though the system was rigged, that hard work and playing by the rules no longer ensured success. “It is scary when you had the lowest unemployment, the lowest African-American unemployment, the lowest Hispanic unemployment, the lowest women’s unemployment,” says Michael Milken, ...
Read More
greater capitalism - UK: A Step Towards UK Crypto-Asset Regulation? Treasury Committee Report Finds Current Status "Clearly Not Sustainable"
The Globe and Mail | Patricia Chisholm | May 22, 2020 The emerging use of artificial intelligence (AI) to support or even replace human financial advisors is attracting the attention of regulators – mainly in Britain but also in Canada. While they’re broadly supportive of AI as a cost-efficient tool to broaden the reach of financial advice, they’re also monitoring the potential risks and challenges, trying to ensure that this advice remains both suitable and transparent for clients. The current crisis is certainly putting the usefulness of the new technology to the test. Tony Vail, chief advice officer at Wealth Wizards, a fwell-known provider of AI-assisted financial advice in Britain, says: “We’re finding increasing demand for our technology solutions [as a result of the crisis]. For example, our digital financial advisor, MyEva, had an unprecedented response to an [online] nudge offering help and guidance with finances related to the impacts of COVID-19.” See:  WealthBar rebrands as CI Direct Investing Given the increased attention on AI-assisted advice, Britain’s Financial Conduct Authority (FCA) is taking a proactive approach on the matter. Last autumn, the FCA and the Bank of England conducted a survey of more than 100 financial services firms on their ...
Read More
AI and fintech models - UK: A Step Towards UK Crypto-Asset Regulation? Treasury Committee Report Finds Current Status "Clearly Not Sustainable"
Wealth Professionals | David Kitai | May 21, 2020 CEO tells WP why the firm is rebranding and what new opportunities lie in the company's future Robo-advisor WealthBar is rebranding as CI Direct Investing with parent company CI financial increasing their ownership stake from 75 per cent to 100 per cent. Tea Nicola, founder and CEO of WealthBar, says that in terms of day to day operations nothing will change for their advisors and their clients. While she admits a bit of melancholy saying goodbye to the brand she built, she accepts that this is the logical next stage for her company and looks forward to the new challenges and opportunities she and her team will be taking on as CI Direct Investing. WealthBar will eventually be combined with Virtual Brokers, CI’s discount broker. See:  Why Partnerships Are the Future for Fintech “We're currently not making any major changes aside from the rebrand itself,” Nicola says. “We're simply fully focused on supporting our customers, growing with the current demand we're seeing and launching this rebrand.” Nicola explained that the rebrand fits in a wider strategy on the part of CI financial, unifying their group of companies under a shared banner ...
Read More
Wealthbar rebrand - UK: A Step Towards UK Crypto-Asset Regulation? Treasury Committee Report Finds Current Status "Clearly Not Sustainable"
Independent.ie | Adrian Weckler | May 21, 2020 A 20-year-old former BT Young Scientist winner has landed $16m (€14.6m) in new funding from some of Silicon Valley’s most prestigious US venture capital firms The famous former data security chief for Yahoo and Facebook, Alex Stamos, has come on as a new investor, as have Eventbrite CEO Kevin Hartz and (French firm) Datadog’s CEO Olivier Pomel.  The heavy-hitting Silicon Valley firms backing the venture are led by Index Ventures with participation from Sequoia Capital and Kleiner Perkins and assistance from Dublin-based venture firm Frontline. “We’re aiming to distill what GDPR did in 99 Articles down to a line of code,” said Mr Curran. Seven years ago, Sequioa invested in the payments firm created by another former Young Scientist winner, Patrick Collison and his brother John. Stripe has gone on to become one of the world’s most valuable private companies, valued at $35bn (€31.7bn). See:   Cyber security world first as unique guide is launched Evervault hosts a network of hardware-secured data processing ‘enclaves’ which allows developers to deploy their applications in privacy ’cages’.  These cages allow information to be processed securely with strictly controlled access but without changing the way that developers ...
Read More
Shane Curran Evervault - UK: A Step Towards UK Crypto-Asset Regulation? Treasury Committee Report Finds Current Status "Clearly Not Sustainable"
Forbes | Christopher Helman | May 21, 2020 It’s everyone’s dream to get paid to do nothing. Bitcoin miner Layer1 is turning that dream into reality — having figured out how to make money even when its machines are turned off.  Layer1 is a cryptocurrency startup backed by the likes of billionaire Peter Thiel. In recent months, out in the hardscrabble land of west Texas, the company has been busy erecting steel boxes (think shipping containers) stuffed chockablock with high-end processors submerged inside cooling baths of mineral oil. Why west Texas? Beause thanks to a glut of natural gas and a forest of wind turbines, power there is among the cheapest in the world — which is what you need for crypto. See:  Bitcoin’s “halvening” is upon us “Mining Bitcoin is about converting electricity into money,” says Alex Liegl, CEO and co-founder. By this fall Layer1 will have dozens of these boxes churning around the clock to transform 100 megawatts into a stream of Bitcoin. Liegl says their average cost of production is about $1,000 per coin — equating to a 90% profit margin at current BTC price of $9,100. So it’s odd how excited Liegl is about the prospect ...
Read More
texas turbines - UK: A Step Towards UK Crypto-Asset Regulation? Treasury Committee Report Finds Current Status "Clearly Not Sustainable"
Guest Post | May 23, 2020 Over the years, the many forms of data storage and transfer devices have failed due to one reason or another. Floppy disks used to get spoiled too quickly, and CDs were an inconvenience when having to burn data on to them just to make it portable. However, after the introduction of USB flash drives to the market, numerous problems faced by almost anyone who had a job working with computers were solved. They are known by many names; flash drives, thumb drives, USB drives, pen drives etc. and come in many shapes and sizes but their main function is storage and transfer of digital data from one location to another. The biggest benefit of these devices is that they are USB (meaning they connect via universal serial bus terminals) and the fact that they are plug-and-play (meaning that they do not require any external software to be installed before use). However, as with anything on the market, certain precautions need to be taken while making a purchase for a USB drive as well as during its use. Some Things to Know When Purchasing a Flash Drive: Avoid buying a USB drive that requires any ...
Read More
Flash drives and USB sticks - UK: A Step Towards UK Crypto-Asset Regulation? Treasury Committee Report Finds Current Status "Clearly Not Sustainable"
Plaid blog | Niko Karvounis & Jesse Dhillon  | May 20, 2020 The financial ecosystem is undergoing an unprecedented digital transformation due to new realities brought on by COVID-19. Consumers and businesses have turned to fintech to manage their finances in record numbers. Digital transformation that was expected to take years is now predicted to take place over a matter of months. Now, financial institutions everywhere must be prepared to meet their customers’ rising demand for digital connectivity. See:  With Plaid Acquisition, Visa Makes a Big Play for the ‘Plumbing’ That Connects the Fintech World Today, Plaid is launching Plaid Exchange to accelerate consumer-permissioned data access strategies for financial institutions. As fintech adoption has grown, so have the needs of financial institutions that must now manage unprecedented customer connections across thousands of fintech apps. Plaid Exchange gives financial institutions, from banks to wealth management firms, an open finance platform that includes critical tools required to manage the secure and reliable data connectivity their customers’ financial lives demand, today and for years to come. At the heart of this platform is the ability for consumers to maintain control and transparency into where and how their financial information is permissioned and shared, ...
Read More
Plaid exchange - UK: A Step Towards UK Crypto-Asset Regulation? Treasury Committee Report Finds Current Status "Clearly Not Sustainable"
Cyber Management Alliance | Aditi Uberoi | May 21, 2020 Established in 2015, Cyber Management Alliance is one of the world’s leading cyber incident & crisis management service providers offering advisory, executive training and bespoke workshops in all aspects of cyber crisis management, incident planning, incident response testing and tabletop exercises. Cyber Management Alliance (CM-Alliance) is the creator of the internationally-acclaimed NCSC-Certified, Cyber Incident Planning and Response (CIPR) course. Previous attendees of the NCSC-Certified CIPR course and tabletop exercises include organisations including the United Nations, UK Ministry of Defence, several UK Police Forces, NHS Trusts, European Central Bank, Swiss National Bank, Microsoft, Ernst and Young, BNP Paribas and many others. See: Accenture: Fintech, Cybersecurity and Methods to Handle Threat Cyber security world first as unique guide is launched Remote Working Cybersecurity Checklist Some areas of risk - note this is not a comprehensive list but a list to help you prepare for cybersecurity attacks: Cybersecurity Passwords Mobile Equipment Privileged Users Phishing Emails and Scams Policy and Illegal Activity Working remotely, Online Meetings & Calls Exceptions and Change Privacy Cyber Attack and Incident Response Backup Backup Backup HR and Mental and Occupational Health Video and Audio Conferences Helpdesk & Support Download ...
Read More
CMA Cybersecurity checklist - UK: A Step Towards UK Crypto-Asset Regulation? Treasury Committee Report Finds Current Status "Clearly Not Sustainable"
Digital | May 20, 2020 The huge e-commerce company also unveiled buy now, pay later and local delivery tools at its annual conference. Need to Know At Shopify’s annual conference, Unite, the e-commerce platform announced a number of new features. Shopify Balance Account is a “one-stop-shop” account for small business owners and a feature several employees are referring to as Shopify’s bank. The online platform also announced Shop Pay Installments, Fulfillment Network expansion, and Local Delivery products. The conference emphasized the importance of strong digital tools and local commerce in COVID-19 retail climate. See:  Shopify displaces RBC to become Canada’s most valuable company Analysis E-commerce giant Shopify announced a number of new tools and programs at its online Reunite event on Wednesday, the biggest of which is Balance, a banking account tailored to the particular needs of small business owners and entrepreneurs. Balance, which will be made available to Shopify merchants in the US later this year, is a one-stop-shop within Shopify’s platform admin allowing sellers to track cash flow, pay bills, and monitor expenses. According to a press release from Shopify, 40% of merchants are currently using personal accounts for some business needs; Balance aims to provide tools that ...
Read More
shopify balance - UK: A Step Towards UK Crypto-Asset Regulation? Treasury Committee Report Finds Current Status "Clearly Not Sustainable"
Forbes | Susan Galer | May 19, 2020 Timelines for the emergence of quantum computers may be fuzzy, but the threat they pose to the vaunted security of blockchain technology is profoundly real. Originally popular as fail-safe security for bitcoin enthusiasts, blockchain is making inroads across numerous industries, most notably as a track and trace tool proving the provenance of goods across vast supply chains. Blockchain-based security may be even more valuable in managing supply and demand shocks during the pandemic and after. However, as blockchain services grow and quantum computers begin to emerge, now is the time to start thinking about quantum-resistant blockchain. “Once quantum computers can break the cryptography being used today, blockchain loses its immutability,” said Cedric Hebert, senior researcher at SAP Security Research. “We wouldn’t be able to trust new transactions on a blockchain that wasn’t meant to resist quantum-fueled attacks. Companies will need to adopt new protocols to resist quantum attacks.” See:  The research frontier: where next for AI and collective intelligence? Right now, it’s difficult to go backwards on a blockchain’s immutable ledger and change original information in each block of the chain. This is especially the case as blocks are added with more ...
Read More
blockchain security - UK: A Step Towards UK Crypto-Asset Regulation? Treasury Committee Report Finds Current Status "Clearly Not Sustainable"

 

share save 171 16 - UK: A Step Towards UK Crypto-Asset Regulation? Treasury Committee Report Finds Current Status "Clearly Not Sustainable"