Bitcoin and cryptocurrency regulation has been pushed into the limelight over recent weeks, thanks to social media giant Facebook’s high profile plans to launch its own potential rival to bitcoin sometime next year.
The bitcoin price, which had been climbing on rumors that big technology companies were taking an interest in bitcoin and cryptocurrencies, has plateaued at around $10,000 per bitcoin after a number of countries rebuffed Facebook’s plans, unveiled in June.
Now, the U.K.’s financial services watchdog has warned potential investors that bitcoin and cryptocurrencies have “no intrinsic value,” with some taking the caution as a signal the country could be moving towards a bitcoin ban.
“This is a small, complex and evolving market covering a broad range of activities,” said Christopher Woolard, executive director of strategy and competition at the U.K. Financial Conduct Authority (FCA), which oversees London’s huge banking industry.
“Today’s guidance will help clarify which crypto-asset activities fall inside our regulatory perimeter,” Woolard added, with the FCA warning: “Consumers should be cautious when investing in such crypto-assets and should ensure they understand and can bear the risks involved with assets that have no intrinsic value.”
The FCA branding bitcoin and cryptocurrencies as without “intrinsic value” is likely to rile many bitcoin believers who have long argued blockchain technology, which unpins bitcoin and most other cryptocurrencies, gives the digital tokens value.
“It is technically true that cryptocurrencies have no ‘intrinsic value’ when compared to share ownership in actual companies, however there are many examples where a marketplace bestows value on an intangible asset,” Jon Ostler, of comparison site Finder.com, told the U.K’s Telegraph newspaper. “For example, the brand of ‘bitcoin’ itself has value and although its future place in society is still unclear, it is one of the most likely coins to stay the course.”
The warning from the U.K. comes shortly after U.S. president Donald Trump unleashed a scathing attack on bitcoin and cryptocurrencies, comments that were then echoed by other senior officials in his administration, including Treasury secretary Steven Mnuchin who branded bitcoin and cryptocurrencies a “national security issue.”
It’s thought that Trump’s attacks on bitcoin and crypto were in direct response to Facebook’s libra cryptocurrency project, which, if successful, could undermine the international dominance of the U.S. dollar.
“Although not a ban, [the U.K.’s FCA warning is] a move in that direction,” said Herbert Sim, head of business development from Broctagon Fintech Group. “This lack of enthusiasm is shared by several countries; the U.S. with its scrutiny of libra, and India, who are looking to implement a similar ban on cryptocurrencies which are not state regulated. These movements could end up coming back to bite. The international competition on cryptocurrencies is heating up and there are huge risks in being left behind.”
Meanwhile, the watchdog warned investing in what it called “unregulated crypto-assets” will not be covered by the Financial Services Compensation Scheme, which pays out if the investment collapses.
“It remains possible in the future that if an unregulated token is subject to common acceptance and usage in the U.K. then either the FCA or the Bank of England will reconsider this position in order to ensure that adequate consumer protection exists,” said Tim Dolan, partner at law firm Reed Smith.