Parliament gets it, crypto-currency bunkum edition

The 22nd report of the House of Commons Treasury Committee inquiry on digital currencies is out, and much of what it has to say on crypto-assets is music to our crypto-sceptic ears. Here, for instance, is the headline conclusion:

Functioning currencies are generally understood to serve as a store of value, a medium of exchange and a unit of account. As yet, there are no so-called “cryptocurrencies” that serve all these functions. Well-functioning cryptocurrencies currently exist only as a theoretical concept, and the term “crypto-assets” is more helpful and meaningful in describing Bitcoin, and the many hundreds of other ‘altcoins’ that have emerged over the past decade.

Thanks go to Izzy, whose robust testimony to the committee we celebrated with a watching party at the time. Her influence, and that of Martin Walker, Director at the Centre for Evidence-Based Management, is clear in the extensive citation of their evidence throughout. Sample:

Ms Kaminska and Mr Walker argued that “the main drivers of the value of crypto- [assets] (particularly Bitcoin) [are] seen to be based on the facilitation of criminal activity, speculation and a strong probability of systematic market manipulation.”

Everyone involved in the Initial Coin Offering gold rush, meanwhile, should be on notice regulation is on its way,:

The development of ICOs has exposed a regulatory loophole that is being exploited to the detriment of ordinary investors. The Regulated Activities Order should be updated to bring ICOs within the FCA’s perimeter as a matter of urgency, and bring investor protections into line with those in the United States.

We'd also highlight some of the other conclusions of the report. For instance, crypto is really inefficient:

The slow, costly and energy-intensive verification process for transactions is not unique to Bitcoin, but a fundamental feature of crypto-assets based on public, decentralised blockchains. This may ultimately limit the extent to which cryptoassets and blockchain can replace conventional money and payments systems.

Crypto won't help the poor:

The arguments put forward that crypto-assets could further financial inclusion are unconvincing.

Blockchain might be useful, but it ain't yet:

the Committee has not been presented with any evidence to suggest that universal applications of the technology are currently reliably operational.

Crypto buyers should beware:

On account of their volatility alone, crypto-assets are especially risky, particularly for inexperienced retail investors.

Crypto sellers should beware:

Crypto-asset markets are particularly vulnerable to manipulation, and they fall outside the scope of market abuse rules. In responding to this Report, the FCA should outline the approach it would take to market manipulation were these markets to fall within its remit.

And did we mention the urgency of the desire for regulation?

The FCA’s consumer warnings are a feeble corrective to advertisements — on social media, billboards, trains and taxis — that only emphasise the upside opportunities of crypto-asset investing.

Related Links:
Kaminska live - FT Alphaville
Into the ether - FT Alphaville
Sorry Jack, Bitcoin will not become the global currency - FT Alphaville