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The report from the finance ministry, Bank of England and
Financial Conduct Authority begins to thrash out Britain's
policy and regulatory approach to cryptoassets including tokens
issued by initial coin offerings (ICOs).
"The Taskforce has concluded that strong action should be taken
to address the risks associated with cryptoassets that fall
within existing regulatory frameworks," the report said.
"Further consultation and international coordination is required
for those cryptoassets that pose new challenges to traditional
forms of financial regulation, and fall outside the existing
regulatory framework," it added.
The FCA said it has made clear that cryptoassets have no
intrinsic value and investors should therefore be prepared to
lose every penny invested.
The sector is still tiny, with bitcoin making up just 0.33
percent of daily global trade volumes, the report said.
There are an estimated 56 ICO projects in Britain that have been
used to raise about $330 million, or just one percent of the $24
billion raised globally by ICOs.
The report sets out milestones for scrutinizing cryptoassets
more closely.
The taskforce will publish a consultation paper by the end of
the year on draft guidance to clarify which cryptoassets fall
within and outside the existing regulatory "perimeter", and
whether the perimeter should be extended.
There will be a separate consultation by the first quarter of
2019 on a potential ban on the sale to retail consumers of
derivatives, including contracts for differences, options and
futures that reference certain types of cryptoasset, the report
said.
"Given the complexity and new challenges presented to
traditional forms of financial regulation, more time is needed
to consider how regulation can meaningfully address the risks
posed by exchange tokens, such as bitcoin," the report said.
The government will issue a consultation in early 2019 to
further explore whether and how exchange tokens, and related
firms such as exchanges and wallet providers, could be regulated
effectively," it added.
Ashurst said the report indicated that regulation is coming
fast. "The proposal to ban crypto derivatives is like using a
sledgehammer to crack a nut," said Bradley Rice, a senior
regulatory associate at the law firm.
The report also looked at blockchain or the distributed ledger
technology (DLT) that underpins cryptoassets such as bitcoin,
saying it has the potential to deliver substantial benefits,
both in financial services and other sectors.
Other regulators are also studying how to regulate cryptoassets,
but so far there is no consensus to go beyond monitoring.
(Reporting by Huw Jones, editing by Andrew Heavens)
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