A crash in the value of Bitcoin has bought UK regulators precious time to examine the market before deciding on a plan of action. Bitcoin’s value has collapsed to $4,500 per unit, having been riding at an all-time high near to $20,000 as recently as December 2017.

In an age of rapid technological advancement, regulators have been thrown into turmoil as to how best adapt their operations to continue monitoring their respective industries. While it has almost always been the case that laws play catch-up to innovation during periods of change, however, when it comes to cryptocurrency and its related technologies, regulators have been caught particularly flat-footed.

In a recent poll of executives by PwC, 48% of participants cited regulatory uncertainty as a top-three barrier to their blockchain efforts. Of those, 27% listed it as a top level concern, as they remain unsure of how a rapidly shifting regulatory scene for the new technology might change, or even scupper its effectiveness in the future. This is also the case with the financial world’s adaptation to the meteoric rise of cryptocurrency Bitcoin.

As recently as 2013, it was thought to be remarkable that Bitcoin’s value had exceeded the $1,000 dollar mark. By December 2017, the notoriously volatile currency’s worth had ballooned to $19,783.21. The record run lifted the trading of Bitcoin to major prominence among investors, but also prompted regulators and central bankers around the world to take a closer look at the sector.

The process of regulating the borderless trading mechanism proved extremely difficult, however. So far, global regulatory bodies have been unable to reach a consensus on rule changes and have instead opted to monitor the sector closely for the time being. Britain, alongside the international community, still faces a conundrum of how to balance an innovative economy with maintaining consumer protection, stable markets and thwarting financial crime; the rapid growth of the bitcoin market had led to pressure mounting on regulators to act quickly.

Fortunately for them at least, some of this pressure has now been lifted, with Bitcoin prices nose-diving over the course of 2018. While some of the cryptocurrency’s critics have suggested this is the bursting of the bubble they have long prophesised, Bitcoin boosters still expect digital currency to rebound. In the interim, though, regulators will have some much needed elbow-room to work on catching up with the market.

According to a recent Reuters article, a fall in the value of cryptoassets over the past year as investors lose interest, and a drop in Bitcoin, which now rests at below $4,500, has eased the pressure to issue tough new rules. British regulators and government officials reportedly told a City & Financial conference they were focused on how 2,000 or more cryptoassets slot into existing rules before considering reforms.

Speaking at the event, Gillian Dorner, Deputy Director for Financial Services at Britain’s Finance Ministry, said, “We want to take the time to look at that in a bit more depth and make sure we take a proportionate approach.”

Christopher Woolard, Executive Director for Strategy and Competition at the Financial Conduct Authority, meanwhile added that there is a need to clarify “grey edges” around the existing regulatory perimeter. Stating that the FCA will consult by the end of this year on where the perimeter lies for cryptoassets, he explained, “This will help clarify which cryptoassets fall within the FCA’s existing regulatory perimeter, and those cryptoassets that fall outside.”

After this point, the Finance Ministry will consult on whether the perimeter itself needed shifting. This follows the news in October that a task force of the Finance Ministry, FCA and Bank of England had recommended a ban on the sale to retail customers of derivatives products linked to cryptoassets.

SOURCE: https://www.consultancy.uk/news/19514/british-regulators-catch-breath-amid-bitcoin-slump