The taskforce was first announced in March of this year by Philip Hammond, UK Chancellor of the Exchequer and Second Lord of the Treasury, as part of the government’s FinTech Sector Strategy. It is made up of of the Bank of England (BoE), HM Treasury, and the Financial Conduct Authority (FCA).
On Monday, the taskforce published its final report that provides an overview of cryptoassets and the underlying technology. The report 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 crypto sector.
The taskforce said that while cryptoassets and blockchain pose “considerable risks,” such as harm to consumers and market integrity, potential to be used for illicit activities, and potential future threats to financial stability, they have the potential to deliver significant benefits in financial services and other sectors in the future.
“DLT has the potential to enhance system resilience; improve the efficiency of end-to-end settlement processes and reporting, auditing and oversight; and enable greater automation,” the report said. “The DLT that powers cryptoassets can also be used to ‘tokenize’ existing financial or tangible assets. However, there remains considerable risks that HMT, the Bank of England and the FCA will take action to mitigate.”
In order to mitigate these risks, the taskforce has committed to a number of actions, including consulting on implementing one of the most comprehensive responses globally to the use of cryptoassets for illicit activities by applying and going further than the fifth EU Anti-Money Laundering Directive. The taskforce will also consult on guidance clarifying how certain cryptoassets already fall within the existing regulatory perimeter, and whether the regulatory perimeter requires extension in relation to cryptoassets that have comparable features to specified investments, but currently fall outside the perimeter.
“The government will issue a consultation in early 2019 to further explore whether and how exchange tokens and related firms such as exchanges and wallet providers could be regulated effectively. ” the report said.