Crypto Investors Warned by MPs over Safety Issues
MPs have issued a warning to crypto investors due to the lack of legal guidance and regulation.
A report by the Treasury Committee has fired a warning shot to cryptocurrency investors and suggested that some are not fully aware of the risks of investing.
The “Wild West” world of cryptocurrency, MPs said, should be stringently regulated by city watchdogs and offer guidance for investors.
No Safety Net
Currently, crypto enthusiasts in the UK are given very little protection when investing. Risks highlighted in the report include hacking and money laundering; while suggesting that the volatile nature of many crypto markets make it easy for people to “lost all their money”.
Cryptocurrencies such as Bitcoin, Ethereum or Ripple have undergone a massive surge in popularity in the past several years, with Bitcoin, in particular, rising from around $900 to more than $20,000 in 2017. These potential rapid rewards have attracted thousands of people worldwide aiming to cash in on the crypto boom. However, market volatility has resulted in huge losses for some investors.
The chair of the Treasury Committee, Nicky Morgan, underlined the “numerous risks” that investors face.
“Bitcoin and other crypto-assets exist in the wild west industry of crypto-assets,” she said. “This unregulated industry leave investors facing numerous risks.”
Morgan added: “Given the high price volatility, the hacking vulnerability of exchanges and the potential role in money laundering, the Treasury Committee strongly believes that regulation should be introduced.”
The committee has recommended that the Financial Conduct Authority (FCA) should take the reins and monitor crypto asset markets. However, it conceded that the city watchdog’s attempts to inform consumers were a “feeble corrective” when considering the widespread advertising for crypto investments.
“The FCA needs more power to control how crypto-exchanges and ICO issuers market their services, by bringing the activities they perform into the regulatory perimeter,” MPs said.
Despite the volatility of crypto markets in 2018, MPs noted that many investors appear complacent about their actions – with a significant amount expecting a financial return from investments in ICOs regardless of whether it is promised.
What is suggested, is that investors will be offered future access to goods and services. This issue, in particular, is a cause for concern at the FCA as current regulatory powers do not extend to investments that offer access to utilities.