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Bitcoin Needs to be Regulated, According to Treasury Committee Report

Bitcoin

The seeming unreliability of Bitcoin and other cryptocurrencies in not providing a risk-free investing environment was pointed out by the MPs on the UK Treasury select committee. Cryptocurrency investments where money laundering is not investigated by governmental authorities, often leads to a crumbling of the investment scenario, resulting in huge losses. The committee compared the present cryptocurrency- investment scenario to the ‘wild west’.

According to MP, Nicky Morgan, chair of the committee, “Bitcoin and other crypto-assets exist in the wild west industry of crypto-assets. This unregulated industry leaves investors facing numerous risks. Given the high price volatility, the hacking vulnerability of exchanges and the potential role in money laundering, the Treasury committee strongly believes that regulation should be introduced”.

This kind of government regulation is essential to mitigate the potential of cryptocurrency exchanges in getting hacked that lead to volatility. In the report published by the committee, it proposes that regulations need to be imposed in a manner that ensures not just accountability but also protects businesses and consumers in the process.

As early as February, the committee had commenced their inquiry into cryptocurrencies. As stated in Investment Weekly by the committee, they would like to ensure sufficient regulation ‘whilst not stifling innovation’. Financial institutions in the UK, including City Regulator the Financial Conduct Authority, do not take into account crypto assets because of which there are no official mechanisms for consumer redressal or investor compensation.

According to the committee, cryptocurrencies need to function at three levels; as a medium of exchange, as a store of value, and as a unit of account. However, as per a member of the committee, “well functioning cryptocurrencies exists only as a theoretical concept”. Though this allows a profitable scenario for the investors, the risk of loss is also heightened accordingly. The government intervention can then lead to a hassle-free arena for further safeguarded investments.

 

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Apoorv Gupta (Senior Correspondent)