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Cryptocurrencies are digital currencies whose ledgers are secured and maintained through cryptography and a distributed system. Crypto assets are highly volatile, and the fact that they can be used to finance illegal activities makes them risky instruments. This raises questions about money laundering, the integrity of the market, the protection of the consumer, and financial stability. Thus, regulation is crucial. 

Investors who already understand the ins and outs of the crypto market want to get in on the market as soon as possible. A presale crypto list can help traders acquire crypto assets before they hit centralised or decentralised exchanges. Nonetheless, even this comes with some risks. Let’s look at how the crypto assets taskforce in the UK looks like and the framework it uses to affect policies. 

What is Crypto Assets Taskforce?

As part of the government's FinTech Sector Strategy, the Chancellor of the Exchequer announced the Crypto Assets Taskforce in March 2018. It is made up of the Bank of England, the Financial Conduct Authority, and Her Majesty’s Treasury. The Taskforce's goal was to bring together representatives from Her Majesty's Treasury (HMT), the Bank of England (BoE), and the Financial Conduct Authority (FCA) to evaluate the possible effects of digital assets and distributed ledger technology (DLT) in the UK and to suggest relevant policy responses. The UK's legislative and regulatory approach to crypto assets and distributed ledger technology in financial services is outlined in the Crypto Assets Taskforce. It gives an overview of crypto assets and DLT, evaluates the dangers and potential advantages involved, and lays out the next steps for UK regulation.

Objectives of the Taskforce 

The Taskforce looks forward to maintaining the UK's reputation by preserving high regulatory standards in financial markets. This ensures that the UK maintains its international reputation as a safe and transparent destination to conduct business in financial services.

It is also mandated to protect consumers and keep an eye out for any threats to financial stability. There is so much marketing noise about crypto assets and many individuals are uninformed about the risk involved with crypto asset investments. The Crypto Assets Taskforce in the UK is focused on enlightening consumers on the risk associated with crypto assets.

The crypto assets Taskforce ensures the cryptocurrency investment is fair to investors. However, the Taskforce believes that the technology is still in its early stages and that there are some significant barriers to widespread implementation. The Taskforce believes that there are no regulatory hurdles to DLT implementation. The Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) will continue to maintain a technology-neutral approach to regulation while also offering a platform for innovation.

The Taskforce Framework

The Taskforce classifies crypto assets into three broad categories. The first category is exchange tokens (digital currencies) such as Bitcoin, Litecoin, and counterparts. These are utilized as a means of exchange or investment.

Secondly, there are Security tokens which are defined as specified investments under the Financial Services and Markets Act (2000). These may include ownership, payback of a certain sum of money, or the right to a share of future profits. Under the EU's Markets in Financial Instruments Directive II (MiFID II), they may also be transferrable securities or financial instruments.

Lastly, there are Utility tokens that can be exchanged for access to a certain good or service, usually offered through a DLT platform. The rights that different crypto assets grant their owners, as well as their actual and future uses, differ greatly. Given the breadth and complexity of applications, the Taskforce created a framework that considers three use cases of the various types of cryptocurrencies as summarised below:

1. As a means of exchange. It serves as a decentralized mechanism for the purchase and sale of goods and services, as well as for the facilitation of regulated payment services.
2. For investment. Through owning and trading crypto assets, businesses and individuals can receive direct exposure to the market or they can gain indirect exposure through owning and using financial products that make use of crypto assets.
3. To promote initial coin offerings (ICOs). These are used to raise money or build decentralized networks.

Final thoughts

The UK Crypto Assets Taskforce has been essential in creating the regulatory landscape for crypto assets and DLT. Its recommendations have been incorporated into policymakers' and regulators' approaches to these technologies.

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