A taskforce established by the Treasury, the Bank of England and the Financial Conduct Authority (FCA) has concluded that distributed ledger technology (DLT) has the potential to deliver benefits to financial services and other sectors, but also carries significant risk
The taskforce reported there is some evidence that certain types of cryptoassets have the potential to deliver benefits in the future, for example when used as an innovative capital raising tool. However, harnessing these potential benefits requires effective action to manage the range of risks observed in the current cryptoasset market, which include harm to consumers and market integrity, the use of cryptoassets for illicit activities and potential future threats to financial stability.
In response, the three authorities have committed to a number of actions. these include consulting on perimeter guidance by the end of 2018 to clarify which cryptoassets fall within the existing regulatory perimeter, and those cryptoassets that may fall outside. This consultation will also look at whether the regulatory perimeter requires extension to capture cryptoassets that have comparable features to specified investments, but currently fall outside the perimeter.
A separate consultation by Q1 2019 will examine a potential prohibition of the sale to retail consumers of derivatives (including contracts for differences, options, and futures) referencing certain types of cryptoassets.
The taskforce said that given the complexity and new challenges presented to traditional forms of financial regulation, more time is needed to consider how regulation can meaningfully address the risks posed by exchange tokens, such as Bitcoin. The government will issue a consultation in early 2019 to further explore whether and how exchange tokens, and related firms such as exchanges and wallet providers, could be regulated effectively.
The authorities also pledged to continue to monitor market developments and work with international counterparts to consider appropriate domestic and international responses. The taskforce will convene every six months to consider developments and review the UK’s approach.
Tax was outside the taskforce’s remit, so substantive considerations of tax issues were not included in its report. However, the report stated that the Treasury is working closely with HMRC to consider the tax issues raised by cryptoassets, and HMRC will be providing updated guidance on the tax treatment of cryptoassets by early 2019, drawing on the taskforce’s work.
Cryptoassets Taskforce: final report is here
Report by Pat Sweet
