The Financial Conduct Authority has been asked to consider broadening its regulatory remit to include crypto-assets, including managing anti-money laundering in the market.
In September the Treasury select committee published a report calling for greater regulation of the "Wild West" of the cryptocurrency market and criticising the Government and FCA’s "feeble" warnings to investors.
Today (December 20), the committee published responses to the report from the government and FCA in which further consultations on the regulation of crypto-assets were promised early next year.
As recommended in the committee’s report, the government has asked the FCA to consider taking on the role of supervising firms in fulfilling their anti-money laundering obligations and consumer protection in the crypto market.
In the regulator’s response, Andrew Bailey, chief executive at the FCA, said: "Crypto-assets are a good example of activity for which the regulatory perimeter was not specifically designed at the time it was put into effect, and therefore there is a strong case to reassess the perimeter definition and scope."
But Mr Bailey warned to assess a regulatory "perimeter" a clear taxonomy of crypto-assets was required for clear definition.
In the government’s response to the report, John Glen, economic secretary to the Treasury, advised that some types and uses of crypto-assets already fall within the existing financial services regulatory perimeter, such as security tokens which qualify as "specified investments" under the Financial Services and Markets Act 2000.
Mr Glen said the government was due to consult early next year on which additional crypto-assets with similar features to specified investments should be "captured in regulation".
He said: "Subject to the outcome of this consultation, the government stands ready to legislate to expand the regulatory perimeter to ensure that FCA regulation can be applied to all crypto-assets that have comparable features to security tokens, regardless of the way they are structured."
Whilst Mr Glen confirmed the government shared the Treasury committee’s concerns regarding the "substantial risks to consumers and market integrity" associated with crypto-assets, he said he also recognised the potential presented by the market and would continue to encourage its innovation and responsible development.
Commenting on the responses, Nicky Morgan MP, chairwoman of the Treasury committee, said: "It is clear that the government and the FCA share the committee’s concerns on crypto-assets, including the lack of regulation, minimal consumer protection, and anonymity aiding money laundering.
"The decision by the government and the FCA to hold a series of consultations about how to mitigate these risks is welcome.
"The committee will keep a close eye on these consultations and will continue to press for regulation."
rachel.addison@ft.com
