With Bitcoin undergoing a rally earlier this year and Facebook touting its own cryptocurrency in Libra, cryptocurrency is once again turning heads.
While regulation has long been a topic of discussion along side talks about cryptocurrency the Financial Conduct Association (FCA) in the UK has upped the ante significantly proposing a prohibition on the sale of “derivatives referencing certain types of cryptoassets”.
This was made known in guidance published by the FCA this week.
The guidance looks at both regulated and unregulated cryptocurrency and the issue appears to be with unregulated currencies. The FCA uses Bitcoin, Ethereum and Ripple as examples of unregulated cryptocurrencies.
The concern is that, while cryptocurrency can be used for exchange purposes, it isn’t a very good store of value. For the regular person in the street, this could lead to some messy situations where the value of your salary could change from moment to moment for example.
Compounding the problem is the fact that the FCA can’t help folks that lose money to cryptocurrency investments.
“Unregulated cryptoassets (e.g. Bitcoin, Ether, XRP etc.) are not covered by the Financial Services Compensation Scheme and consumers do not have recourse to the Financial Ombudsman Service,” the FCA explained.
As such the association is proposing an outright ban on unregulated cryptocurrencies as soon as this year.
There is still a consultation process which would need to take place. That having been said, the FCA notes that a number of respondents in its guidance report supported this idea and that is concerning.
While we understand that cryptocurrency is not without its flaws, we tend to lean towards folks being afraid of it because they don’t quite understand it.
Indeed the FCA quips,”Consumers should be cautious when investing in such cryptoassets and should ensure they understand and can bear the risks involved with assets that have no intrinsic value.”
“No intrinsic value” is a phrase that will stick with us for a long time. The value of cryptocurrency is the underlying technology (blockchain) which makes the currency incredible secure and transactions nearly impossible to fake.
Hell, folks were able to track the exact wallets NotPetya/ExPetr ransoms were paid into before the coins were fed through a tumbler to make tracking harder.
The crux of the guidance puts the onus on those operating a cryptocurrency to seek out regulation with the FCA. This might be easier for some cryptocurrencies owners than it will be for others.
What this means for the future of cryptocurrency in the UK remains to be seen but we have a feeling folks aren’t going to be happy with what the FCA is outlining.[Image – CC 0 Pixabay]