UK officials have outlined a range of regulatory steps around cryptoassets and distributed ledger technology (DLT) in a new report.
The UK government’s “Cryptoasset Taskforce,” first announced this past March, published its final report on Monday, finding that the technology that makes up cryptocurrencies can be used to benefit the financial services sector, as well as other industries.
As such, the HM Treasury, Financial Conduct Authority and the Bank of England – the three groups that constitute the task force – will “encourage responsible development of legitimate DLT and cryptoasset-related activity in the UK.”
The report notes elsewhere:
“While the authorities’ immediate priority is to mitigate the risks associated with the current generation of cryptoassets, the Taskforce considers that other applications of DLT have the potential to deliver significant benefits in both financial services and other sectors. The authorities do not believe there are regulatory barriers to further adoption of DLT.”
“However, the technology requires further development before it could be used at scale and before these opportunities could be realized,” it added.
Among the concrete actions to take place in the coming months is updated guidance for would-be crypto-taxpayers. The report says while the subject is outside of the scope of the Taskforce’s report, “HM Treasury is working closely with HM Revenue and Customs to consider the tax issues raised by cryptoassets.”
“Current guidance on the tax treatment of cryptoassets is set out on HMRC’s website. HMRC will further update their guidance by early 2019, drawing on the Taskforce’s work,” the report notes.
The UK is also looking to take steps that would formalize rules around initial coin offerings that take place in the country.
“The government will issue a consultation in early 2019 to further explore with the industry whether there are examples of such cryptoassets on the UK market and, if so, whether an extension of the regulatory perimeter is required,” the report states.
More steps outlined
The report contends that the government will also “take action to mitigate the risks that cryptoassets pose to consumers and market integrity,” as well as prevent the use of cryptocurrencies in illegal activity, while also monitoring for any threats to financial stability.
The report states that cryptocurrency use in criminal circles “remains low,” though the risk for their use in activities such as money laundering appears to be increasing. Of greater concern, perhaps, is the risk to consumers due to potential losses and the risk to market integrity that could arise from market manipulation.
In its conclusion, the report also calls for clarification of a regulatory framework around security tokens, initial coin offerings (ICOs), and financial instruments which reference cryptocurrencies and tokens listed on exchanges.
Other recommendations include more cooperation with international authorities on such issues and further steps to make consumers aware of the risks associated with investing in cryptocurrencies.
The task force will continue to meet “every six months to consider developments and review the UK’s approach,” the document noted.