Seven UK cryptocurrency companies have come together to self regulate. The companies which include Coinbase and eToro seek to stamp some legitimacy as more governments across the world clamp down on the fledgling sector.
A code of conduct is already in place and CryptoUK hopes this will become a blueprint for regulation. The association brings together a growing number of players in the industry including exchanges, comparison sites, merchants, asset managers and other intermediaries.
The association does not however represent ICOs although a working group is said to be considering the issue with a view to crafting a self-regulatory framework.
Calls to rein in on the sector have intensified in the past few weeks The latest comes from IMF chief Christine Lagarde.
Earlier cryptocurrencies like Bitcoin had their beginnings in the underworld, a fact that still sends jitters in some sections. Interest in digital currencies has however since grown into a mainstream obsession.
Spectacular gains in value triggered a frenzy for cryptocurrencies in 2017. Bitcoin for example was trading at $1000 in January 2017 but its value had risen to nearly $20,000 by December.
China for example has placed outright bans on all cryptocurrency activities.
Three regulators, the European Banking Authority, European Securities and Markets Authority, and the European Insurance and Occupational Pensions Authority sounded warnings on Monday to investors they could lose all their investments in cryptocurrencies in what they called a “pricing bubble, lack of transparency and consumer protections.
The European Central Banks has used similar terms even terming cryptocurrencies as “Ponzi schemes.”
The onslaught on many sides has put stress on the market that was slowly recovering from a massive slump in February. Recently, Google announced it was banning cryptocurrency related advertisements to protect its consumers from “misleading promotional material.”
Finance Ministers from France and Germany have also joined the chorus for regulation and have urged the G20 to discuss the issue during its meeting in Buenos Aires.
But Iqbal Gandham, the CryptoUK Chairman says the sector is “severely misunderstood.”
The Etoro Director said CryptoUK has been established to “promote best practice and to work with government and regulators to ensure that the UK benefits from the exciting potential of this international technology.”
eToro is a global trading and investment platform and has over 9 million clients worldwide. The platform allows investment in the world’s most popular financial markets and has recently added cryptocurrencies to its portfolio. Its proprietary CopyTrader technology allows users to copy the most successful traders.
Coinbase is the largest bitcoin broker with operations in over 30 countries.
CryptoUK will now take leadership in this entirely new space and hope to create some legitimacy for an industry in urgent need of it. It remains to be see whether governments would want to build on these efforts while developing their own regulations.
“We believe that by working together we can ensure that the UK fulfils its potential to be a global leader in this exciting new industry,” the association says on its website.
The association’s code of conduct provides guidance on safeguarding customer funds in case of insolvency, due diligence and security.
Other members of the association include Commerce Block, CoinShares, BlockEx, CEX IO, and CryptoCompare.
Iqbal says he believes regulations governing the industry are still fluid across the world. At the same time, he said the association would welcome and support the formation of similar associations across the world.
But the enduring fear about cryptocurrencies by governments is mainly about the ease with which it avails itself for criminal activities such as money laundering and terrorism financing. Cryptocurrency transactions can be conducted with complete anonymity.
Similar issues however exist in traditional fiat currencies. In fact, by design, cryptocurrencies can be built to allow for tracking if need be. The immutable nature of the records that can be kept using the blockchain technology, sets up cryptocurrencies for even better oversight.