Financial Conduct Authority warns bitcoins and other cryptocurrencies have no intrinsic value
The UK Financial Conduct Authority (FCA) has warned that bitcoin and other cryptocurrencies have no intrinsic value and offer consumers few protections.
The warning from the financial watchdog came in a new report, in which it said that crypto markets were highly dysfunctional, with the onus on consumers to understand the risks associated with investing in unregulated assets.
Last year MPs warned that cryptocurrencies such as Bitcoin should be regulated to protect consumers against a “Wild West” industry in which people could lose everything they invest.
The International Monetary Fund (IMF) has also called for governments to harness change going on in the fintech arena, and consider setting up their own digital currency.
But the FCA in its report was clear about its thinks about the sector.
“A combination of market immaturity, volatility, and a lack of credible information or oversight raises concerns about market integrity, manipulation and insider dealing within cryptoasset markets,” the FCA report stated. “This may prevent the market from functioning effectively and damage its reputation.”
Yet despite these flaws, the FCA said that existing rules did not apply to bitcoin and other tokens, or to firms like exchanges and trading platforms.
“This is a small, complex and evolving market covering a broad range of activities,” said Christopher Woolard, executive director of Strategy and Competition at the FCA. “Today’s guidance will help clarify which cryptoasset activities fall inside our regulatory perimeter.’
“We have some concerns around some of the harms that consumers can be exposed to,” Nick Cook, FCA director of innovation, told Reuters, adding that investment by British consumers in crypto was still fairly low.
The FCA report comes as regulators in the US have reacted to the news that Facebook intends to join the cryptocurrency sector with its Libra coin, a move that has sparked a backlash by politicians and regulators across the globe.
Microsoft co-founder Bill Gates has also expressed major reservations about cryptocurrencies, and accused the technology of killing people in a direct way.
In 2017 for example researchers discovered that a script for mining cryptocurrency had been maliciously placed on popular sites across the web.
The British Bankers Association (BBA) has previously warned that cryptocurrencies could be used to help fund terrorism.
Indeed, soon after the Paris attacks in 2015, the European Union (EU) discussed a crackdown on cryptocurrencies to try and prevent anonymous transactions being used to fund terrorist attacks.