This 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.
By HM Treasury, Financial Conduct Authority and Bank of England
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.
There is limited evidence of the current generation of cryptoassets delivering benefits, but this is a rapidly developing market and benefits may arise in the future. There are substantial potential risks associated with cryptoassets, and the most immediate priorities for the authorities are to mitigate the risks to consumers and market integrity, and prevent the use of cryptoassets for illicit activity. The authorities will also guard against threats to financial stability that could emerge in the future, and encourage responsible development of legitimate DLT and cryptoasset-related activity in the UK. This report sets out actions the authorities will take to deliver these objectives.
The Taskforce has concluded that strong action should be taken to address the risks associated with cryptoassets that fall within existing regulatory frameworks. Further consultation and international coordination is required for those cryptoassets that pose new challenges to traditional forms of financial regulation, and fall outside the existing regulatory framework. The authorities plan to engage with international bodies to ensure a comprehensive response.
This report lays out a clear path to establish the UK’s policy and regulatory approach to cryptoassets and DLT. This is a fast-moving global market, with the technology developing and the nature of cryptoassets evolving. The authorities will keep their approach to cryptoassets and DLT under review to ensure the UK continues to support innovation, while maintaining safe and transparent financial markets.