Regulation of the UK cryptocurrency market could take two more years to enact, according to corporate law firm Reynolds Porter Chamberlain (RPC).
In a press release, the firm said that a two-year timeframe for passage of legislation on cryptocurrencies was a “best-case scenario,” based on previous financial legislation.
In September, the UK Parliament’s Treasury committee released its report on cryptocurrencies in which it stated that the “Wild West situation” of the industry could not continue. The highly critical report suggested for the Financial Conduct Authority (FCA) to be the regulating body.
RPC said, “Past precedents show it can take years to make relatively minor regulatory changes to the financial regulatory regime. For example, it took two and a half years from the Treasury’s original announcement (10 May 2004) for the regulation of home reversion plans to come in force (6 November 2006).”
According to the firm, HM Treasury would have to assess, “perhaps with market study,” what cryptocurrency-related activities are to be regulated, as well as conduct consultations on proposed draft rules.
“Even if MP’s latest proposals were fast tracked, it could still take years for regulations to cover the UK cryptocurrency market that tread the middle ground between protecting retail participants and allowing the UK’s cryptocurrency market to thrive,” James Kaufmann, RPC legal director, said.
He also expressed concerns that “[b]ringing a complex and fast evolving area like cryptocurrencies into a regulatory framework is going to be a difficult and lengthy process. Added to this, big issues like Brexit are already occupying a lot of regulator’s time.”
Although the Parliament members had tagged the FCA as a regulator, RPC questioned if the agency would have the capacity, funding, and expertise to regulate cryptocurrencies, and be able to prepare for markets’ reaction to the regulations.
The firm added that it agreed with the sentiment of the Treasury committee report on the value of implementing “a workable regulatory regime for cryptocurrencies.” Kaufmann said, “The creation of a cryptocurrency trading hub may also have positive knock-on effects for businesses serving these markets, such as brokers, investment banks, and custodians as well as a potential increase in tax revenues for authorities.”
Even with warnings of cryptocurrency-related investments, the trade is largely uninhibited in the UK. The London Block Exchange (LBX) recently launched a service that would allow storage, transfer, and management of digital assets, initially for traders, investment fund managers,s and companies with initial coin offerings (ICOs).