Cryptoassets and the distributed ledger technology (DLT) that underpins them have attracted significant attention globally. In light of rapid developments in the market, the substantial potential of applications of DLT, and growing evidence of the risks associated with cryptoassets, the Chancellor of the Exchequer launched the Cryptoassets Taskforce in March 2018.
The Taskforce brought together HM Treasury, the FCA and the Bank of England to develop an approach to cryptoassets and DLT that maintains the UK’s international reputation as a safe and transparent place to do business in financial services; ensures high regulatory standards in financial markets; protects consumers; guards against threats to financial stability that could emerge in the future; and allows those innovators in the financial sector that play by the rules to thrive.
This report provides an overview of cryptoassets and the underlying technology, assesses the associated risks and potential benefits, and sets out the path forward with respect to regulation in the UK.
The Taskforce concluded that robust action should be taken to address the risks associated with cryptoassets that fall within existing regulatory frameworks. Further consultation and international coordination is required for those cryptoassets that pose new challenges to traditional forms of financial regulation, and fall outside the existing regulatory framework. All three authorities plan to engage with international bodies to ensure a comprehensive response.
In particular, the Bank of England will continue to:
- monitor financial stability implications of cryptoassets
- assess the adequacy of the prudential regulatory framework with respect to cryptoassets, in conjunction with international counterparts
- work towards enabling the renewed RTGS service to be capable of interfacing with innovative payment platforms, including those based on DLT.
This is a fast-moving global market, with the technology developing and the nature of cryptoassets evolving. The authorities will keep their approach to cryptoassets and DLT under review to ensure the UK continues to support innovation, while maintaining safe and transparent financial markets.