3 min read
Industry figures have welcomed government plans to regulate some stable forms of cryptocurrency, but cite concerns that the push could increase risk for amateur investors.
The Treasury announced on Monday that “stablecoins”, a form of cryptocurrency which has its value linked to traditional currencies like the dollar, would soon be brought under existing UK financial regulation.
It also confirmed that it had directed the Royal Mint to create a government-backed NFT — non-fungible token, a digital asset that can be sold and traded — to signal its commitment to cryptocurrencies.
The move comes despite existing concern about an increase in scams and fraud related to mainstream growth of cryptocurrencies and NFTs.
The Financial Conduct Authority revealed last month that it had received 6,372 alerts about suspected crypto frauds last year, up from 3,143 the year before.
In one high-profile case, New York-based art gallery owner Todd Kramer admitted that he had lost $2.2 million worth of NFTs from the ‘Bored Ape Yacht Club’ series following a phishing scam.
Charley Cooper, chief communications officer at blockchain technology company R3 warned that, when it came to cryptocurrencies and NFTs, much of the general public “may not understand the risks”.
“Crypto volatility and lack of stability means that everyday investors may not understand the risks involved and end up getting hurt,” Cooper said.
David Canellis, director of news at Protos, agreed that promoting the widespread use of NFTs and cryptocurrencies “could expose new users to new kinds of digital threats”.
But he added that most cases could be avoided with “typical safeguards like not getting phished by clicking malicious links in dodgy emails”.
“It’s also true that newcomers might need to learn new computer security techniques in order to participate in the crypto ecosystem,” he told PoliticsHome.
“Anyone thinking about getting into cryptocurrency… should absolutely research best practices for keeping cryptocurrency safe while interacting with the internet.”
Canellis said he expected the Treasury’s plans to issue an NFT would “present lawmakers, regulators, and other public officials a great chance to learn something new” and “help shape public policy in a constructive way moving forward”.
There are also wider hopes in the industry that bringing cryptocurrencies into the fold of UK financial regulation may help stem the rise in fraud.
“For the industry to continue to grow and become mainstream, investors must have trust in the infrastructure and framework underpinning it – and it starts with regulation,” said Todd Crosland, CEO at cryptocurrency exchange CoinZoom.
“This trust cannot be founded in an unregulated environment that permits bad actors to roam freely.”
Crosland added: “In the meantime, individual traders and institutions alike should seek out exchanges that are reputable and properly regulated in order to ensure their money is protected.”
Dr Carlos León, Director of Financial Markets Infrastructures at FNA, also said that regulating the more stable forms of cryptocurrencies could result in “fast-tracking protection for consumers” in the future.
He said: “This is a practical and convenient approach. Instead of limiting, restricting, or banning crypto activities, well-designed regulation would allow the people and firms to use and promote crypto products vis-a-vis traditional financial products.”
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