The UK Treasury has launched a cryptocurrency task force, but do UK financial institutions believe in cryptocurrencies?
Regulations have been a top priority for the burgeoning cryptocurrency markets around the world in 2018 and there has been a lot of work done on this front in the space of three months.
Cryptocurrency markets floundered at the start of the year, after record highs for Bitcoin and other notable alt coins in December. This came to a head as February dawned, in the wake of mass uncertainty in the Far East and serious apathetic rhetoric towards the industry coming out of the World Economic Forum in Davos.
But a highly anticipated hearing on cryptocurrencies by the heads of the Securities Exchange Commission and Commodities and Futures Trading Commission alleviated fears of stifling regulatory moves in America.
This move cannot be understated in terms of the example it has set for governments and financial institutions trying to come to grips with the rise of cryptocurrencies around the world.
In fact, the move has prompted the British Treasury to setup a cryptocurrency task force that will essentially follow the example set by the SEC and CFTC to provide guidelines that will regulate and foster the growth of the industry in the UK.
Global Sandbox- playground for crypto development
They’ve arguably gone a step further than the Americans, as the British Financial Conduct Authority is launching a fintech global sandbox following the success of a British version in 2016.
According to Trustnodes, Financial Conduct Authority (FCA) board member and Director of Strategy and Competition Christopher Woolard says a number of British fintech startups went to market, in part due to the success of the programme.
In a speech presented in London in March, FCA chairman John Griffith-Jones also highlighted the spotlight on cryptocurrencies in Britain:
“The hot topic of the day is what to do about cryptocurrencies, to which on the one hand the official sector does not wish to afford the status of a currency, but which are being advertised to the consumer as alluring investments on billboards in Canary Wharf. Therefore have all the potential of causing consumer harm unless brought within the regulatory perimeter.”
The FCA seems to be taking a more objective stance towards cryptocurrencies and initial coin offerings, having warned consumers of the potential pitfalls in September last year.
That being said, the FCA said in December that it is more interested in the applications of distributed ledger technology for financial services that it regulates, as opposed to cryptocurrencies in general.
However, it added that it “is open to all forms of deployment of DLT (including both permissioned and permissionless DLT networks) provided the operational risks are properly identified and mitigated.”
This effectively means that it will examine and foster the development of public ledgers like Bitcoin and associated ICOs.
Financial institutions still disinterested?
However, there is an underlying tone of continued apathy towards cryptocurrencies, especially from banking heads.
Just last month, Bank of England governor Mark Carney delivered a scathing critique of Bitcoin, claiming the cryptocurrency has failed in its quest to become a fully-fledged currency at an event at London’s Regent University.
“It [cryptocurrency]has pretty much failed thus far on… the traditional aspects of money. It is not a store of value because it is all over the map. Nobody uses it as a medium of exchange.”
Cointelegraph reached out to MIT Professor of Economics John van Reenen OBE to give his take on the move by the British Treasury and the touted cryptocurrency taskforce.
The renowned economist painted a slightly bleak picture in terms of the possibility of change in sentiment from British financial institutions. He believes there is no change in sentiment in “official circles, government or main financial institutions” but that public perception was easing.
However, Van Reenen did concede that cryptocurrency markets may pick up in the UK if there was clarity on regulation coupled with a rise in popularity of virtual currencies.
Referring once again to Carney’s Regent University address, these institutions seem to be primarily interested in the benefits of Blockchain technology:
“Cryptocurrency’s underlying technology may still prove useful as a way to verify financial transactions in a decentralized way.”
It leads one to think that this cryptocurrency task force may be nitpicking the best characteristics of cryptocurrency and Blockchain technology to better its own interests and offerings. This insular view does little to promote the development of the technology on a global scale.
It certainly pays a disservice to the notion of decentralization as a whole.
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Author: Gareth Jenkinson