Bitcoin and other cryptocurrencies need regulation to bring them out of the “wild west,” according to the UK’s Treasury Committee, which has oversight over the country’s spending, as well as regulation of the financial sector.
The influential group of MPs argue that, at a minimum, regulation should be introduced to add consumer protection and counter money laundering.
“Bitcoin and other crypto-assets exist in the wild west industry of crypto-assets. This unregulated industry leaves investors facing numerous risks,” Member of Parliament (MP) Nicky Morgan, the chair of the committee, said.
“Given the high price volatility, the hacking vulnerability of exchanges and the potential role in money laundering, the Treasury committee strongly believes that regulation should be introduced.”
To do this the financial watchdog recommended placing the Bitcoin and cryptocurrency industry under the supervision of the Financial Conduct Authority (FCA) — which looks after the country’s banks.
Bitcoin, cryptocurrencies, and crypto-fundraising schemes known as initial coin offerings (ICOs) are however a difficult thing to regulate unless you want them to become no different from the existing financial industry that many think they could one day replace.
Too much regulation and Bitcoin and cryptocurrencies lose their anonymity, their decentralization, and their peer-to-peer nature that make them attractive.
Meanwhile, the UK government has recently said it also wants to try to bring the internet as a whole out of the “wild west” — with new laws being proposed in May.
At the time the UK’s home secretary, Sajid Javid, said: “Criminals are using the internet to further their exploitation and abuse of children while terrorists are abusing these platforms to recruit people and incite atrocities. We need to protect our communities from these heinous crimes and vile propaganda, and that is why this government has been taking the lead on this issue.”
If the internet, which has had some three decades of mainstream use, dominated by the world’s biggest global companies, remains a criminal wild west, what hope does the UK’s FCA have of bringing Bitcoin out of the wilds?
Bitcoin and cryptocurrencies have emerged as a way for people to subvert tight capital controls, for neo-nazis to move cash around the world, and (of course) for people to buy illegal drugs online.
The internet has proven remarkably astute at evading regulation — and Bitcoin, as well as the wider cryptocurrency sector, will be no different.
Rather unhelpfully, regulators’ attitudes to blockchain and cryptocurrencies around the world vary wildly.
In Asia, South Korea and China have cracked down on their Bitcoin and cryptocurrency industries while in Europe France, Switzerland, Malta, and Gibraltar want to outline rules to tempt fintech businesses. The U.S. continues to keep Bitcoin and cryptocurrencies at arm’s length.
The Treasury Committee report found that “proportionate regulation could see the UK as well placed to become a global center for crypto-assets.”
If Bitcoin and cryptocurrency want to remain decentralized, governed only by a public blockchain, this kind of regulation will ultimately fail.