Mary Starks, Director of Competition of the Financial Conduct Authority (FCA), said that there has been a shift from cryptocurrencies as a medium for exchange to being seen primarily as an asset class.
Speaking at the Authority for Consumers & Markets Conference Panel in the Netherlands, Starks said that most people now view bitcoin and other cryptocurrencies as an asset class rather than a means of payment – hence “cryptoassets.” She said the shift in the perception is both cause and effect of the volatility in their price.
“In 2017, the price of bitcoin appreciated from around 850 euro to over 14,000 euro (that’s 1600%),” Starks said. “Why would I use bitcoin to buy a pint of beer, when tomorrow it could be worth 20% more? Of course since then we have seen prices go the other way, down about 50% in the first quarter of 2018.”
Starks further said that this shift has a range of public policy implications. She said the UK Government recently created a cryptocurrency taskforce, which FCA is part of, to assess whether further regulatory action is required and to monitor international developments.
“Financial regulators are not generally in the business of judging when specific assets are overvalued, especially niche assets which (even at $325 billion) do not appear to pose a systemic risk,” she said. “However, given our consumer protection objective, we do want to understand who is investing and how much, and we want to guard against people losing more than they can afford to.”
Regarding blockchain, Starks said the potential applications for the technology are far-reaching, but there are risks.
“I am optimistic about the promise for these developments to improve financial services markets,” she said. “However, I am not so naïve as to think that there are not perils here as well. We will need to understand this technology, its strengths and its vulnerabilities, and its implications for competition, much better before we are comfortable to entrust it with significant swathes of our financial infrastructure. We need to ask ourselves as regulators what we should do so that we are not inhibiting the benefits, nor overlooking the risks.
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