The UK parliament has launched a cross-party group of lawmakers to create a framework to regulate digital asset markets, a report by the Financial Times has revealed.
The group, called the Crypto and Digital Assets Group, is composed of UK MPs and members of the House of Lords. It also counts former digital economy minister Ed Vaizey among its members, along with Tory MP Harriett Baldwin, a former JPMorgan executive and city minister.
The group’s aim is to work to make sure that new rules for the digital asset industry “support innovation”, according to SNP MP Lisa Cameron, who will chair the group.
The formation of the group, which is backed by digital asset trade association Crypto UK, follows persistent crypto lobbying to better regulate the market.
Ian Taylor, executive director of CryptoUK, said, “Our primary focus will be education, education, education… There is no real advocacy and education at that level around crypto assets.”
The trade association — which represents companies such as Crypto.com and eToro — will serve as the parliamentary group’s secretariat, spending just under £50,000 this year to support the group, according to public filings.
The group has also pledged to tackle economic crime and protect consumers. This comes at a time when regulators have repeatedly issued warnings about the risks of crypto scams and unregulated firms.
A report by Chainalysis revealed that cryptocurrency-based crime reached record highs in 2021. The report found that illicit revenue from scams shot up 82% in 2021 to around $7.8bn worth cryptocurrency. Chainalysis researchers attributed a big part of the growth to a climb in ‘rug pulls’, which is a fraud scheme where developers set up seemingly legitimate cryptocurrency projects with the aim of stealing investors’ money and then disappearing.
The Financial Conduct Authority (FCA) also warned a ‘significantly high’ amount of cryptocurrency firms are not meeting UK requirements on money laundering prevention.
The UK is not alone in its concerns about the risk and safety of the cryptocurrency market. The US Securities and Exchange Commission (SEC) chair outlined shortfalls in US regulation of cryptocurrencies that could cause investor risk and financial crime concerns.
These concerns included that many crypto tokens are currently improperly unregistered securities that lack mandatory disclosures and market oversight. This puts the crypto prices at risk for manipulation and leaves investors vulnerable.
In the UK, crypto industry advocates have warned that the government has been too slow to settle the rules of the road for digital asset business, which risks pushing them offshore. Philip Hammond, the former UK chancellor who last autumn signed up as an adviser to crypto custody group Copper, told the FT that “the UK has not moved as quickly as Switzerland, Singapore and even Germany” and that the country needed to embrace financial innovation to compete after Brexit.
Also, high on the new group’s agenda will be to examine the FCA’s money laundering registration regime for crypto companies, as well as the outcome of two pending policy consultations on crypto advertising and stablecoins.
Moreover, SNP MP Cameron said that looking at how to best protect consumers should also be a top priority for governments and regulators. She said the rules for advertising and registering crypto firms need to be clear to help shield consumers from losses and give “UK firms business certainty”.
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