An inquiry into cryptocurrencies has been launched by an influential UK parliamentary committee. The Treasury Select Committee of the House of Commons announced today that it will begin hearings on “digital currencies and distributed ledger technology”.
Contrary to reports on CoinDesk and elsewhere, the Treasury Select Committee is not an arm of the government or HM Treasury, and as such it can only make recommendations as opposed to laying down rules and regulations.
Nevertheless, the committee has the power to take oral and written evidence from both regulators and industry bodies as well as cross-examine individuals at its hearings. The reports of parliamentary committees can sometimes act as the foundation upon which legislation is brought forward by government.
Nicky Morgan MP, the chair of the parliamentary committee and a former secretary of state for education, says the inquiry will assess the “regulatory response” of the UK’s main financial regulator, the Financial Conduct Authority (FCA), as well as the attitude of government and the position of the Bank of England, the country’s independent central bank.
Morgan, a member of parliament for the ruling Conservative party, worries that consumers are oblivious to the lack of regulation in the cryptocurrency arena. “People are becoming increasingly aware of cryptocurrencies such as Bitcoin, but they may not be aware that they are currently unregulated in the UK, and that there is no protection for individual investors,” said the lawmaker.
Balance regulation and innovation
The committee will look at how to balance regulation to protect consumers, businesses and the financial infrastructure “without stifling innovation”. In that vein, Morgan commented: “We will also examine the potential benefits of cryptocurrencies and the technology underpinning them, how they can create innovative opportunities, and to what extent they could disrupt the economy and replace traditional means of payment.”
She continued: “The distributed ledger technology that supports digital currencies is said to have significant transformative potential, not least within the financial services sector.
“Striking the right balance between regulating digital currencies to provide adequate protection for consumers and businesses, whilst not stifling innovation, is crucial. As part of the inquiry, we will explore how this can be achieved.”
Although money laundering rules apply to cryptocurrency exchanges in the UK, investors and users of cryptocurrency do not come under the deposit insurance arrangements that apply to other financial products.
The FCA has issued consumer warnings about the dangers of contributing to initial coin offerings but there are no regulations that apply to this new way of raising funds from investors.
Also, the FCA has sandboxes for blockchain development ongoing in which companies can securely test their products without having to worry about the regulatory implications.
Earlier this week the governor of the Bank of England, Mark Carney, dismissed bitcoin as a monetary failure. “It has pretty much failed thus far on … the traditional aspects of money. It is not a store of value because it is all over the map. Nobody uses it as a medium of exchange,” said Carney in comments he made to a university audience in London.
