14 Jan UK Forms Parliamentary Group To Tackle Cryptocrime
Ransomware, DeFi rug pulls, and exit scams are rife
London – Jan. 14, 2022
The United Kingdom has formed a parliamentary group focused on the regulation and control of cryptocurrency and financial assets.
On Jan. 7, the Financial Times reported that Westminster’s new cross-party initiative, dubbed the Crypto and Digital Assets Group, will be composed of UK MPs and members of the House of Lords.
The group will be chaired by Scottish National Party (SNP) MP Lisa Cameron.
The Crypto and Digital Assets Group will examine and discuss potential legislation to regulate cryptocurrency and digital assets while also supporting innovation in financial technology.
Cameron told the FT, “We are at a crucial time for the sector as global policymakers are also now reviewing their approach to crypto and how it should be regulated.”
The rules surrounding cryptocurrency, NFTs, investment, and tax declaration in the UK can be murky at best. Laws surrounding crypto trades have been implemented in the past few years, and HMRC now may tax some crypto assets, including Bitcoin (BTC).
However, the government is also concerned about the rising rates of cryptocurrency-related crime, which is a cross-border issue that often requires cooperation between law enforcement in different countries.
The new initiative will also tackle crypto and digital asset crimes and fraud with consumer protection in mind — a directive that the SNP MP says needs to be a “top priority.”
Cybercrime Radio: How much damage is cybercrime inflicting?
Big picture view from the CISO at Crypto.com
Regulators have already begun. The UK’s Advertising Standards Authority (ASA) has cracked down on cryptocurrency exchanges publishing adverts that could be considered irresponsible or misleading to consumers new to the crypto space, with popular trading posts crypto.com, Coinbase, and eToro becoming some of the latest companies to feel the sting.
However, this does not go far enough when fake exchanges, cryptocurrency apps, and scams are rife. UK citizens face a constant barrage of ads related to digital services that promise ludicrous rates of return, and to make them appear trustworthy, the names of legitimate public figures are fraudulently used in advertisements, such as crypto schemes that claim to have the support of MoneySavingExpert.com founder Martin Lewis.
Earlier this month, Chainalysis published a new research preview on cryptocurrency and digital crime trends. The blockchain analysis company estimates that usage is growing at a rapid rate, with total transactional volumes surpassing $15.8 trillion in 2021, up 567 percent year-over-year.
With increased usage and interest, criminal opportunities also grow. During 2021, suspicious wallet addresses received $14 billion, up from $7.8 billion in 2020.
While regulators worldwide are seeking ways to clamp down on tax avoidance, the use of cryptocurrency to facilitate ransomware payments, decentralized finance (DeFi) rug pulls, and exit scams remain rife.
In total, Chainalysis estimates that $7.8 billion of crypto assets stolen were due to scams, of which at least $2.8 billion was generated by rug pulls — the creation of fake crypto projects such as the SQUID token based on the popularity of the Squid Games TV series, of which developers rug pulled investors, crashing the token while walking away with millions of dollars. (It should be noted there is no official connection between the TV show and token.)
Hype, ramping up coins and crashing them, the “get rich quick” success of a handful of people, and the decentralized nature of many cryptocurrency projects makes investment a speculative, volatile gamble in many cases — and so in the minds of UK parliamentary figures, educating and protecting consumers needs to become a priority.
CryptoUK, a self-regulatory trade association, will contribute to the bipartisan effort through a secretariat role.
Launched in 2018, CryptoUK includes BitPay, crypto.com, Finch & Associates, Kings College London, and Zumo among its members, and aims to educate politicians and contribute to discussions concerning regulatory frameworks.
A CryptoUK spokesperson told us that the initial challenge will be to “implement a level of education to the majority of House as to what the nature of cryptocurrencies and digital assets actually are.”
“Our mission is to have a balanced regulation of crypto and digital assets and the first task is an understanding of the positive benefits this can bring to the UK in terms of trade, employment and further recognition of being a world leader in the Fintech industry which now includes crypto,” the spokesperson added.
In 2018, the UK government announced the Cryptoassets Taskforce to explore the business, stability, and risk factors associated with crypto assets and distributed ledger (DLT) technology in financial services.
The task force’s final report (.PDF) said: “The task force has concluded that while DLT is at an early stage of development, it has the potential to deliver significant benefits in financial services and other sectors in the future […] there is limited evidence of the current generation of crypto assets delivering benefits, but this is a rapidly developing market and benefits may arise in the future.
There are substantial potential risks associated with crypto assets, and the most immediate priorities for the authorities are to mitigate the risks to consumers and market integrity, and prevent the use of crypto assets for illicit activity.”
– Charlie Osborne is a journalist covering security for ZDNet. Her work also appears on TechRepublic, Cybercrime Magazine, and other media outlets.
Go here to read all of Charlie’s Cybercrime Magazine articles.