What does the regulator think about cryptocurrency?

This article is part of
Guide to Cryptocurrencies

“This is welcome but the more interesting issue is where regulation will move to next, how far will the regulation go?  New money laundering regulations which come into force in January will, for example, extend regulatory requirements for anti-money laundering regulation to new product types, such as cryptocurrencies.”

“Cryptocurrencies like Bitcoin have been highly volatile, but not all cryptoassets are the same. Before investing, investigate the substance of the investment, whether there is real money behind it and what the safeguards are around this.”

NextHash, a cryptoexchange founded by Ana Bencic is expanding its digital asset platform where digital assets are traded. These are not only cryptocurrencies, but they also include digital securities or tokenised securities.

Daniele Mensi, managing director at NextHash says: “The FCA is very open in understanding and not rejecting upfront the opportunity of this market. We see [the FCA’s statement] with optimism, which leads us to think that there should be improvements that should come soon.”

Tyler Welmans, UK blockchain lead at Deloitte, says the market has attracted a sizeable amount of scrutiny, with prices fluctuating hugely since its inception. 

For some, investment in cryptocurrency has generated outsize returns, whilst others have lost value.

Mr Welmans adds: “Cryptocurrencies that are decentralised, not linked to a central authority, and limited in supply such as Bitcoin and Ether can be vulnerable to huge price fluctuations, driven by changes in market sentiment and amplified by speculators. 

“On the other hand, the value of stablecoins, cryptocurrencies backed by assets such as cash and gold, are less likely to fluctuate as their value generally follows the real world assets they are linked to.”  

Meanwhile, Adrian Lowcock, head of personal investing at Willis Owen does not believe cryptocurrency is ready for the [investment] market yet because of the gaps in regulation.

Mr Lowcock says: “If you are an adviser telling someone where to invest money and you told them to buy cryptocurrency, I would be interested to see what the FCA would say about that. I think you would struggle to justify it. 

“It is probably right for advisers to be skeptical about it at the moment.”