Cryptoassets and the distributed ledger technology (DLT) that underpins them have attracted significant attention globally. DLT has the potential to deliver substantial benefits, both in financial services and other sectors. Cryptoassets are one application of DLT, and whilst the UK market has grown, it remains small compared to some other jurisdictions, with many cryptoasset firms based outside the UK. Mainstream financial services firms are taking first steps into the market, and a small derivatives market is developing. At the same time, there is growing evidence of harm to consumers and markets. It is against this backdrop that the Chancellor of the Exchequer launched the Cryptoassets Taskforce, consisting of HM Treasury, the Financial Conduct Authority and the Bank of England in March 2018.
The government has set out an ambition for the UK to be the world’s most innovative economy, and to maintain its position as one of the leading financial centres globally. 1 The UK is well placed to achieve this, as host to a very mature and diverse domestic financial sector. This is a function of, but also relies on, the UK maintaining its international reputation as a safe and transparent place to do business in financial services; ensuring high regulatory standards in financial markets; protecting consumers; and allowing innovators in the financial sector that play by the rules to thrive, so that the benefits of new technologies can be fully realised. The Taskforce has developed a response to cryptoassets and DLT that is consistent with these objectives.
The report provides an overview of cryptoassets and the underlying technology, assesses the associated risks and potential benefits, and sets out the path forward with respect to regulation in the UK. It brings together existing work and new analysis carried out by the Taskforce, and has benefited from the contributions of stakeholders across the DLT and cryptoasset sector.2 This has been a substantial undertaking, and the joint efforts of all three authorities – as well as valuable industry input – have been crucial in considering these issues holistically. The Taskforce has concluded that while DLT is at an early stage of development, it has the potential to deliver significant benefits in financial services and other sectors in the future, and all three authorities will continue to support its development.
View the report here.