U.K. Treasury Committee Calls For Crypto Regulation

UK Treasury Cryptocurrency Regulation ICO initial coin offerings

An influential group of U.K. lawmakers has called for greater regulation around the cryptocurrency sector in a report published today.

The Treasury Committee published their report some seven months after first announcing their intention to look at the sector, and to examine the benefits and risks of cryptocurrencies to the U.K.

Arguing for the introduction of regulation as a matter of urgency, the report said that cryptocurrencies have “no inherent value,” suggesting that in their present form, this makes them “particularly vulnerable to manipulation.”

This echoes concerns in recent months from some institutional investors who have cited the lack of regulation around cryptocurrencies as one of the main barriers to more substantial institutional investment flooding into the cryptocurrency markets.

In particular, the report examined initial coin offerings, which the Treasury Committee said were exploiting current gaps in U.K. regulation to the “detriment of ordinary investors.”

“While there may be no explicit promise of financial returns, investors in ICOs clearly expect them: they are not buying tokens to gain access to as-yet-unbuilt theme parks, or to obtain dental services in years to come, but in the hope of selling them at a profit. The development of ICOs has exposed a regulatory loophole that is being exploited to the detriment of ordinary investors.”

The committee said that the speculation around cryptocurrency markets meant that unlike commodities or company shares, prices moved more by sentiment than fundamentals, a problem brought into relief by those using cryptocurrencies like bitcoin for payments.

“The use of blockchain as a payments system exacerbates these risks, since the exchange rate (vis-à-vis other crypto assets, or conventional currency) can fluctuate significantly during the time it takes to settle a transaction.”

However, rather than looking to choke growth in the cryptocurrency sector, as in some jurisdictions pursuing greater regulation, the Treasury Committee said regulation had the potential to enhance the positive benefits of cryptocurrencies, as well as encouraging development in the blockchain sector.

“The committee believes that the introduction of regulation could lead to positive outcomes for the crypto-asset market.”

The calls will be particularly welcome among U.K.-based crypto investors, many of whom have been calling for greater regulation around crypto assets and ICOs.