Many businesses are not satisfied with the new regulations coming into force which will hinder the UK crypto industry. A joint report released by the British Business Federation Authority (BBFA), Baker Botts law firm, venture capital fund Novum Insights, and crypto exchange TodaQ were highly critical of the new proposal, going so far as to claim that ‘bad regulation is worse than no regulation at all.’ The government is extending the power of the FCA under the ‘Regulated Activities Order’ to bring cryptocurrencies into the same category as traditional assets.
The ‘blunt instrument approach’ towards UK crypto
The UK’s financial regulator is known as the Financial Conduct Authority (FCA), and in March, the FCA created a cryptocurrency task force, similar to the SEC’s cryptocurrency task force spearheaded by Valerie Szczepanik in the USA. The FCA is currently investigating at least 24 businesses’ potential cryptocurrency activities, according to an FOIA request. At the time, previous FCA chairman John Griffin-Jones stated that cryptocurrencies could be harmful if they were not brought within the regulatory sphere.
But as true as this may be, businesses are not happy with the way that regulation is being brought to the DLT industry. The new report argues that the current plan by the FCA to regulate the industry is overly focused on bitcoin. This could be quite harmful to the myriad other coins, each with distinct features. As per the BBFA chief CEO Patrick Curry –
“It is a very blunt instrument approach, and I haven’t seen this in other countries…The use of this technology is still a voyage of discovery, and these technologies are being refined for different types of use. My concern is the law of unintended consequences.”
DLT proving difficult to regulate
Politicians may be in a dilemma when it comes to the UK crypto industry. On the one hand, it needs to be regulated (though regions such as Japan seem to be taking a self-regulated, or at least a semi-regulated, approach). On the other hand, it is proving almost impossible to regulate. This is because case law is needed to resolve some outstanding issues, and there needs to be extensive research completed on the new industry before any kind of effective regulation can come into force. By the time this has been completed, more coins will have been created that defy the previous classification system. This is currently happening to the ICO industry. It has already been rendered obsolete, though the USA, Dubai, and the EU have indicated that a comprehensive framework for ICO regulation should be in place by 2019.
In a difficult situation, the UK government seems to have taken the heavy-handed yet necessary approach of extending the power of the FCA under the Regulated Activities Order. As it stands, crypto assets are being classed as stocks, shares or bonds under the same rules. Speaking with The Telegraph, Neil Foster of Baker Boots stated that –
“With sophisticated classification we should work out what could be a regulated activity. If you crowbar everything into the Regulated Activities Order you are making everything into an investment bank.”
Digital Nomad with an interest in Zen and Blockchain technology.
Law graduate with 3 years experience as a consultant in the capital markets industry and 4 years experience freelancing on UpWork as a Creative Writer.