Regulator tightens the rules
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.