Regulating cryptocurrency and stopping fraud is becoming increasingly “complicated and difficult”, according to Treasury minister John Glen.
Glen told Westminster’s Treasury Select Committee today that there needed to be a “level playing field” on regulation between cryptocurrency traders and the wider financial services industry in the wake of crypto’s increasing popularity.
There is mounting evidence that cryptocurrencies, like Bitcoin, are being used to launder money and fund terrorist groups.
Hisham Chaudhary, from Oadby in Leicestershire, was recently sentenced to 12 years in jail for funneling thousands of pounds in Bitcoin to the Islamic State terror group.
The Financial Conduct Authority (FCA) acts as a regulator over firms that facilitate the trade of cryptocurrency, however it is believed there are many firms operating illegally without approval.
The FCA also warned in June that a “significantly high number” of the 169 crypto dealers that withdrew applications for accreditation with the regulator fell short of anti-money laundering requirements.
The government’s recent national risk assessment of money laundering and terrorist financing placed cryptocurrency in the “medium risk” category.
Speaking to MPs today, Glen said: “I think part of the challenge is that the proliferation in cryptocurrencies and the different bases for them means the challenges are becoming more complicated and difficult.”
He also said cryptocurrency could be brought into the FCA’s financial promotion regulations, which mandates that all online promotions must be “must be fair, clear and not misleading”.
“That would create more of a level playing field in terms of the expectations of fairness and clarity that exists across the financial services industry more broadly,” Glen said.
Nicholas Ryder, a professor of financial crime at the University of the West of England, told the Telegraph: “Crypto assets are more difficult to detect due to the high level of anonymity, which is convenient for criminals of all stripes. The anonymity provided by crypto assets poses a significant threat.”