British cryptocurrency platforms are calling on a group of influential MPs today to support proposals to regulate the industry in the UK.
CryptoUK, a self-regulated trade body of seven exchanges, is working to make the cryptocurrency sector more legitimate and transparent.
The group set out the plans as part of a written response to the Treasury Select Committee's inquiry into digital currencies today.
MPs are currently examining the role of digital currencies in the UK, including the risks they pose to consumers, business and the government.
Regulators across the world are looking into cryptocurrencies over fears they are being used criminally. The EU's top law enforcement agency has said money laundering taking place via the unregulated digital cash could amount to as much as £4bn.
CryptoUK said regulation should focus on exchanges, brokers and trading platforms rather than the cryptocurrencies themselves, and said HM Treasury should grant the Financial Conduct Authority (FCA) new permissions to govern crypto investment.
The group wants the FCA to issue crypto-licences to approved platforms and enforce new requirements, including appropriateness checks on investors, anti-money laundering rules and operational standards.
Iqbal Gandham, the chair of CryptoUK and UK managing director at trading platform eToro, said: “Introducing a requirement for the FCA to regulate the 'on-off' ramps between crypto and fiat currencies is well within the remit of HM Treasury. Based on our analysis, this could be achieved relatively easily, without the need for primary legislation, and would have a huge impact, both in reducing consumer risk and improving industry standards.
“This is an approach which is already working well in other countries, who are now taking the lead over the UK, for example in Japan and Gibraltar."
Gandham added: “This is a wonderful opportunity for government to take a proactive stance, putting action where there are positive words and reinforcing the UK’s role as the world’s financial capital."
Leading think tank director dismisses blockchain
MPs are also looking into the potential impacts of blockchain technology on financial institutions.
Giving evidence at today's select committee meeting, Martin Walker, the director of think tank the Centre for Evidence Based Management, said blockchain had become a fad in the banking industry.
“In terms of demonstrable benefits [blockchain technology offers] little to nothing,” he said. "There's a big problem in the blockchain world with confusing 'could' for 'is'."
He added: "Blockchain has become a fad, and fads can be very destructive."
Chris Taylor, the chief operating officer of blockchain startup Everledger, conceded that blockchain doesn't solve everything, but he said it solves the problems his company is working to solve in a better way than other technologies.