UK regulation of the cryptocurrency market would take two years to introduce based on comparable extensions of the FCA’s remit, according to James Kaufmann, Legal Director at RPC.
A couple of years may be necessary for the introduction of crypto-asset market regulation in the UK, according to professional services firm RPC. James Kaufmann, Legal Director at RPC, says that this is based on the best-case scenario where proposals in the recent House of Commons Treasury Committee report start to be progressed.
The process of introducing the necessary regulations, along with the required consultation period, is lengthy.
Past precedents indicate it can take years to make relatively minor regulatory changes to the financial regulatory regime. For instance, it took two and a half years from the Treasury’s original announcement (May 10, 2004) for the regulation of home reversion plans to come in force (November 6, 2006).
To regulate cryptocurrencies, HM Treasury will need to:
- Assess which specific activities related to cryptocurrencies need regulating;
- Draft proposed regulations open to consultation;
- After the consultation period has closed, publish changes and set an implementation date.
James Kaufmann says: “Even if MP’s latest proposals were fast tracked, it could still take years for regulations to cover the UK cryptocurrency market that treads the middle ground between protecting retail participants and allowing the UK’s cryptocurrency market to thrive.”
Mr Kaufmann also noted that big issues like Brexit are already occupying a lot of regulator’s time.
RPC anticipates the introduction of new regulations to result in a substantial expansion in the role and remit of the FCA. This, according to the firm, raises questions over whether the FCA:
- Has the capacity and funding to handle the expansion of its role;
- Has the requisite expertise to regulate a sector as technically complex as cryptocurrencies;
- Is prepared for how cryptocurrency markets may react in response to regulations.
Let’s recall that the UK Treasury Committee’s Report was rather stark and stressed the need for regulating what the Committee calls the “Wild West” crypto-asset market. The report recommended that the Regulated Activities Order be updated to bring ICOs within the FCA’s perimeter, and bring investor protections into line with those in the United States. The absence of regulation of crypto-asset exchanges was dubbed particularly problematic.
The Committee argued that the FCA has to have more power to control how crypto-exchanges and ICO issuers market their services, by bringing the activities they perform into the regulatory perimeter. Such a step would also provide investors with wider protections against mistreatment, including loss of deposits through fraud and hacking, or losing access to funds due to the loss of passwords.