Keeping up with its friendly stance towards the operation of cryptocurrencies, the United Kingdom Crypto Assets Taskforce comprising of experts from the Financial Conduct Authority (FCA) published a detailed report in October 2018.
Understanding the fear of regulation and its impact on the financial service industry, the report provides constructive recommendations and spreads the awareness of different risks.
It did not seek a ban nor any restriction on the operation of cryptocurrencies.
Some of the key recommendations in the report are
- Every crypto business within the territory of the country must register with the FCA by January 10, 2021.
- Parties that have to comply with these regulations include different kinds of exchange solution providers (Centralized, Decentralized, and Peer to Peer), token creators, payment gateway developers, cryptocurrency ATM suppliers and websites allowing the download of open-source software.
- Customers dealing in cryptocurrencies would have to submit details such as photographs and proof of address to their service providers.
- Entities will have to keep a close eye on suspicious transactions to prevent financial crimes such as money laundering and fund misappropriation.
- Non-complying firms may be subjected to severe fines, and censure of operations in public.
- Leading cryptocurrency dealers in Bitcoin, Ethereum and Litecoin have to comply with the regulations to ensure due diligence.
Objections raised by Cryptocurrency solution providers
- These strict regulations may lead to a compromise in financial autonomy, privacy, and immutability of transactions which are integral for a well-functioning Cryptocurrency exchange.
- Personal information of the user can never be disclosed to authorities for complying with regulations to preserve anonymity.
- Very few cases of money-laundering occur in cryptocurrency exchanges done by certain miscreants who want to compromise its high standards in monetary transfers.
- This can be dealt with by regulators in a better way by fetching the details of such misuse of exchanges instead of demanding the entire industry to toe the line.
- Since the cryptocurrency industry is booming now powered by the advantages of digitization, such harsh measures taken arbitrarily could impact the growth of the promising industry that offers innovative financial solutions.
- The industry must not be viewed as a threat to the existing banking system but should be considered as a complementary provider that improves the accessibility of the financial system.
- Investor protection can be enforced through regular audits rather than banning the sale of cryptocurrency derivatives (exchange tokens) to traders.
Striking the right balance between freedom and protection
While constructive regulations are welcome as it helps in improving the functioning of the industry, beneficial innovation must also be encouraged simultaneously. Serious steps are needed to combat financial crime and protect the integrity of investors in a time-bound manner. However, it must not conflict with the daily operations of cryptocurrency exchanges.
An international framework laid down by a notable world organization would enable more exchanges to be receptive towards regulations.
As the popularity of virtual currencies grows, the risks would consequently expand. Hence, crypto assets would have to keep a close watch on how their assets are being traded and the sources where funds are being raised.
Authorities would have to clearly define the framework of their regulations and their applicability to various parties. Through consistent legislation, it can define the scope of its guidance and expand it according to the financial landscape.
Companies that are ambitious on Crypto Exchange development but concerned about the impact of regulatory measures can reach out to the Blockchain App Factory. Their team of legal experts possess deep market knowledge and can allay all your issues smoothly.
