The All Party Parliamentary Group for Crypto and Digital Assets (APPG), a cross-party group of MPs and Lords in Parliament chaired by Dr Lisa Cameron MP, has published a report on the need for urgent regulation of the cryptocurrency and digital asset industry in the UK, following its official inquiry into the sector.
The report, 'Realising Government’s Vision for the UK to Become a Global Hub for Cryptocurrency & Fintech Innovation,' makes 53 recommendations to Government on key areas including the UK’s approach to regulation of cryptocurrency; the role of UK regulators including the Bank of England, the Financial Conduct Authority and the Advertising Standards Authority; the potential of central bank digital currencies; and risks in terms of consumer protection and economic crime.
The main findings of the report include:
- The rapid growth of cryptocurrency and digital assets and the increased interest and adoption amongst consumers and investors suggests that cryptocurrency is here to stay and needs to be regulated to protect consumers and to ensure guardrails for investment and economic growth;
- The growth of the sector, without comprehensive regulation, presents considerable risks particularly in terms of consumer protection, economic crime, and financial stability.
- Cryptocurrency and digital assets are best regulated within existing and new financial services regulations.
- The cryptocurrency and digital assets industry presents a number of potential opportunities, which the UK is well placed to harness but it will require cross-governmental strategic planning to realise them.
- Other countries are moving quickly to develop clear regulatory frameworks. The UK must move within a finite window of opportunity within the next 12-18 months to ensure early leadership within this sector.
- Significant concerns remain regarding whether regulators currently have the resources, capacity and technical expertise required to deliver on their responsibilities. All UK regulators related to the sector should have dedicated and properly resourced cryptocurrency and digital assets units.
- Government requires a coordinated and joined up approach across all departments towards regulation of cryptocurrency, digital assets and blockchain technologies. Government should consider the appointment of a ‘Crypto Tsar’ to coordinate across departments to ensure a consistent approach.
The APPG welcomed the steps that the Government is taking alongside the Bank of England to explore the potential of a digital pound.
The APPG also agreed with the recent recommendations by the International Organization of Securities Commissions (IOSCO) that regulators “should seek to achieve regulatory outcomes for investor protection and market integrity that are the same as, or consistent with, those that are required in traditional financial markets."
Announcing the launch of the report, Chair Dr Lisa Cameron MP said that "given the rapid growth of cryptocurrency and digital assets, the timing of this report is vital to protect consumers whilst ensuring the UK’s leadership in this sector can be realised.”
As part of its inquiry, the APPG sought views from across the industry including from operators, regulators, industry experts and the general public on the need for regulation of the sector. The group also held a series of public evidence sessions in Parliament to hear from experts on the considerations that need to be made in order for the Government to achieve its vision for the sector.