27 Apr 2018
Britain remains aware that while blockchain technology presents numerous useful applications, it also has potential risks to consumers and competition, a financial regulatory official said.
Cryptocurrencies have evolved from being a medium for exchange to being seen as an asset class, said Mary Starks, Director of Competition, at the Financial Conduct Authority, however, “Cryptoassets are a well-known application of Blockchain which has demonstrated some risks, and may require further monitoring going forward.”
Distributed Ledger Technology, on the other hand, shows potential promise for improving the financial services market, “but these benefits need to be balanced against the risks to competition which may emerge.”
Currently, cryptocurrencies are unregulated in the UK, however the FCA does regulate derivative products based on these assets, as well as initial coin offerings (ICOs) she explained.
The government recently announced the creation of a cryptocurrency taskforce to assess whether further regulatory action is required and to monitor international developments.
“As a financial regulator, my thoughts on blockchain fall roughly into 2 groups. The first group of thoughts is about Bitcoin and other cryptocurrencies – and those are slightly anxious thoughts.
“The second group is about other applications of distributed ledger technology in financial services – and those thoughts are more optimistic,” she said.
Starks’ remarks reflect the cautious approach the regulator has taken towards virtual currencies in the past year, including issuing a number of warnings to the public.
In September 2017, it issued a consumer warning about investing in ICOs and two months later it warned against investing in cryptocurrency contracts for differences (CFDs), citing price volatility and transparency issues.
Starks made the remarks in a speech drafted for the Authority for Consumers & Markets Conference Panel, Netherlands, event.
“We will need to understand this technology, its strengths and its vulnerabilities, and its implications for competition, much better before we are comfortable to entrust it with significant swathes of our financial infrastructure,” she concluded.
“We need to ask ourselves as regulators what we should do so that we are not inhibiting the benefits, nor overlooking the risks.”
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