Reg­u­la­tor tight­ens the rules

The Sunday Telegraph - Money & Business - - Business - Hasan Chowd­hury

The UK risks missing out on a slice of the lu­cra­tive $200bn (£157bn) global cryp­tocur­rency mar­ket if it fails to cap­i­talise on new rules due to be un­veiled by the Fi­nan­cial Con­duct Au­thor­ity, ac­cord­ing to the chair­man of the coun­try’s first cryp­tocur­rency trade as­so­ci­a­tion.

Iqbal Gand­ham, who launched Cryp­touk in Fe­bru­ary, be­lieves the FCA’S newly launched Global Fi­nan­cial In­no­va­tion Net­work will in­tro­duce a vi­tal reg­u­la­tory frame­work and sta­bil­ity re­quired to es­tab­lish Lon­don as a major player in cryp­tocur­ren­cies like Bit­coin, Monero and Ethereum.

Un­til now, the lack of reg­u­la­tory over­sight of the sec­tor and al­leged links with or­gan­ised crime have fu­elled fears about its sta­bil­ity and fu­ture.

Cryp­tocur­ren­cies are dig­i­tal cur­ren­cies that are not backed by a cen­tral bank. In­stead, pay­ments are pro­cessed se­curely us­ing a se­ries of so­phis­ti­cated com­puter en­cryp­tion tech­niques. They rely on so-called “blockchain” tech­nol­ogy – a type of dig­i­tal ledger hosted across a net­work of com­put­ers.

“This am­bi­gu­ity that we’ve had in reg­u­la­tion so far has caused a lot of plat­forms and ex­changes to not set up op­er­a­tions in the UK be­cause they don’t know whether they can hire 50 peo­ple or 100 in the UK, or if they’re go­ing to be switched off the fol­low­ing morn­ing,” says Gand­ham.

The FCA will work with a team of 11 reg­u­la­tors from coun­tries in­clud­ing the US, China and Aus­tralia.

Signs that the UK’S banks and fi­nan­cial in­sti­tu­tions are tak­ing cryp­tocur­ren­cies more se­ri­ously are emerg­ing.

This month, law firm Field­fisher ad­vised on the first list­ing of a cryp­tocur­rency min­ing plat­form on the Lon­don Stock Ex­change.

Bar­clays opened an ac­count in the UK for San Fran­cisco-based dig­i­tal cur­rency ex­change and Cryp­touk mem­ber Coin­base ear­lier this year.

For Gand­ham, hes­i­tance to get in­volved with cryp­tocur­ren­cies will soon dis­ap­pear as planned reg­u­la­tion starts to give mar­kets and in­sti­tu­tions con­fi­dence by re­duc­ing the po­ten­tial for fraud. “I think there was a lot of re­ac­tion from the US and other coun­tries when there was a spike in prices, but I think [the UK] hav­ing a wait and watch ap­proach has ac­tu­ally been a pos­i­tive,” he says. Ac­cord­ing to price mon­i­tor Coin­mar­ket­cap, the mar­ket cap­i­tal­i­sa­tion of cryp­tocur­ren­cies has dropped glob­ally from a peak of $832bn in Jan­uary to ap­prox­i­mately $200bn at present. A surge in crim­i­nal ac­tiv­ity has also spooked in­vestors, as a re­port from a cy­ber security com­pany found that more than $761m has been laun­dered from cryp­tocur­rency ex­changes in 2018.

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