Regulators have approached the rise of crypto-assets and initial coin offerings (ICOs) differently across jurisdictions. Some like Malta and Switzerland have implemented frameworks to encourage the development of local ICOs, while others have put in place a ban of some (South Korea) or all (China) cryptocurrencies-based financial products and activities.

UK regulators have issued warnings to consumers on the risk of investing in cryptocurrency derivatives and ICOs, but have so far decided not to bring these activities within the regulatory perimeter. This may well change with the latest verdict from the TSC. 

The obvious place for regulators to start their work on cryptocurrencies would be the areas of risk they have flagged to date - money laundering, consumer protection, market integrity and transparency. However, in the UK, the competition objective of the FCA has also led it to consider the opportunities that cryptocurrencies could bring to markets and consumers in the longer term. We expect any regulation to therefore consider both the risks and opportunities.  

We expect the Cryptoassets Task Force, composed of HM Treasury, the Financial Conduct Authority and the Bank of England, to report on its assessment of the risk later this year. But the recent report by the Treasury Select Committee has highlighted that there is, among the policymaking community, a strong support for stricter regulation of crypto-assets. 

In this context, there is a case from both a business and regulatory perspective for firms already operating in the ICO and cryptocurrency space, as well as those considering it, to prepare for what we see as the inevitability of regulation. Our recent blog on cryptocurrencies explores this further.