UK MPs call for Regulations on ‘Wild West’ Crypto Market

  • Commons Treasury select committee warns of “litany of risks” to consumers under current “Wild West” market conditions
  • MPs propose expansion of Financial Conduct Authority’s remit to cover crypto trading and duplication of existing European crypto regulations in the event of hard Brexit.

Members of the UK House of Parliament have warned that a gap in the country’s financial regulatory framework risks exposing investors to hefty losses and asset theft due to hacks amongst “a litany of risks” under current crypto market conditions which they described as “Wild West”.

Speaking recently, the Commons Treasury select committee urged the government to institute effective regulation to insulate investors from risk, reduce money laundering and turn the UK into a “global centre” for the cryptocurrency industry.

Expanded FCA Remit

To this end, the committee recommended that the Financial Conduct Authority (FCA) should be given oversight over the crypto finance and blockchain sector “as a matter of urgency”, expanding existing regulation to include cryptocurrency instead of creating a new framework from scratch in the interest of speed.

Committee chair Nicky Morgan said at the hearing:

It’s unsustainable for the government and regulators to bumble along issuing feeble warnings to potential investors, yet refrain from acting.

According to them, the impact of regulation on the sector could lead to a less volatile market and increased liquidity. Existing EU anti-money laundering (AML) and know-your-customer (KYC) regulations were also recommended for expedited introduction on the part of the government, with their key benefit being the ability to curb money laundering and terrorism financing.

Post-Brexit Crypto Regulations

According to the report, in the event of a hard Brexit with no transition period, the government should make it a priority to replicate EU rules in UK law as quickly as possible following the March 31 deadline to exit the EU. In the interim, the report said, consultation on the regulations should be brought forward.

The MPs also recommended enhanced legal backing for the FCA in order to enable it to regulate crypto exchange platform advertising and ICO companies or promoters.

The report comes a few months after a pioneering parlay between the UK crypto industry and members of the committee earlier in the year. In May, CryptoGlobe reported that Crypto UK  - the body that represents the UK’s leading cryptocurrency platforms - met with the Commons Treasury select committee to drum up support for the nascent industry and help give it legitimacy.

Israel Bitcoin Association Petitions Banks to Reveal Crypto Policy

Neil Dennis

A number of Israel's bitcoin traders have already filed lawsuits against the country's banks and on Monday traders lodged a formal petition demanding that the financial industry explains its cryptoasset policy.

Israel's banks have barred the country's crypto investors from depositing the returns on their bitcoin and other digital currency investments due to the nation's strict laws on money laundering and the financing of terrorism.

In recent months banks have even blocked investors who are known to trade cryptoassets from opening accounts, according to a report by Israeli business journal Globes.

Central Bank Warning

Israel has seen strong growth in digital currency investment in recent years and in 2014 the Bank of Israel, the nation's central bank, issued a warning - in co-operation with the Tax Authority and several regulatory agencies - about the dangers associated with the use of virtual currency, including fraud and money laundering.

Taking aim directly at financial services providers, the statement said:

As the use of virtual currencies enables their anonymous transfer, in many cases evading the need to use financial institutions that are subject  to an anti-money laundering and terror financing prohibition regime, this is an activity with a high risk co-efficient in terms of money laundering and terror financing. Therefore, financial institutions must take this into account within the framework of their risk management policy.

Injunction

Israel's top legal authority is well aware a problem exists. In February 2018, the Supreme Court issued a temporary injunction prohibiting a bank from blocking activities in an account held by a company that engaged in bitcoin trading.

The bank, however, countered the Supreme Court's injunction, citing the 2014 Bank of Israel warning regarding the risks of bitcoin trade. The bank alleged that activities exposing the bank to such unlawful acts might "harm its reputation and public trust in the bank".

While the injunction stood, it did not affect the bank's right to examine individual activities in the account, nor did it affect the bank's ability to take steps to minimize risks associated with the business activities of the company.

Freedom of Information

The freedom of information petition filed in the Jerusalem District Court on Monday by the Israel Bitcoin Association demands that commercial banks make public their policies on cryptoassets.

Jonathan Klinger, legal adviser to the Bitcoin Association, told Globes:

Under the Banking (Licensing) Law, it is the duty of a bank to state to the Bank of Israel the policy under which it refuses to conduct transactions. We therefore contacted the Bank of Israel and asked for this information, but the Bank of Israel did not agree to disclose this policy to us. We therefore decided to petition the court to force the Bank of Israel to provide us with a copy of the policy submitted to it by the banks.

Lawsuits

Last week the Tel Aviv District Court received a petition for approval of a 75 million shekel ($21.3 million) class action suit against Bank Hapoalim that alleges the bank refused a customer seeking to deposit money from the sale of digital currencies.