The regulatory status of virtual currencies, whether Bitcoin, Ethereum or others, varies from country to country.

The thought of slack regulation can make investors nervous but regulatory bodies are working hard to keep up with the fast pace of innovation in this field. The UK's financial watchdog, the Financial Conduct Authority (FCA), does not currently regulate cryptocurrencies or exchanges. However, the FCA does not have its head buried in the sand when it comes to the trade in cryptocurrencies.

In 2014, the Authority launched Project Innovate - an initiative encouraging innovation in the fintech sector that provided some welcome regulatory certainty. In 2017 the FCA also published a report on distributed-ledger technology (the technology underpinning cryptocurrency) and its uses and benefits. Although the FCA doesn't regulate exchanges, it does consider crypto derivatives to be financial instruments and strongly advises firms that deal in, arrange transactions, advise on or provide other services that amount to regulated activities to comply with its rules and those of the European Union. If a firm is dealing in cryptocurrency futures, contracts for differences and option, it must have authorisation by the FCA to do so.

The FCA is there to protect consumers: it conducts frequent risk assessments of the firms it regulates and assists traders who want to file for compensation if their financial firm becomes insolvent. For further peace of mind, new legislation in the EU dictates that cryptocurrency exchanges and platforms must now apply due diligence procedures, including customer verification, to limit the scope of money laundering and unscrupulous financing.

To reassure cryptocurrency investors and to attract fintech entrepreneurs, the British government has just announced a new crypto assets task force - consisting of HM Treasury, the Bank of England and the FCA - which will further probe the benefits and risks of crypto assets. The task force will also assess what further regulation is needed to safeguard cryptocurrency investors. "With strong domestic demand for fintech products, a world-leading financial services sector, a thriving tech scene, a positive regulatory environment and strong government support, it's no wonder that the UK is riding the crest of this wave as the best place in the world to start and grow a fintech business," said finance minister Philip Hammond.

He added: "We are committed to building the most pro-growth and pro-innovation regulatory environment in the world for fintech." The UK's decision to regulate cryptocurrency trading can only be good news. It will lead to more transparency and co-operation between authorities, platforms and investors and increase trust and protection. As regulations are fine-tuned, it will be a reassuring signal for the market that the government has analysed all outcomes and determined that crypto is a regulated asset class unto itself.

Mark Carney, the governor of the Bank of England, has also come down firmly on the side of further regulation: "The time has come to hold the crypto-asset ecosystem to the same standards as the rest of the financial system," he said. "Being part of the financial system brings enormous privileges, but with them great responsibilities."

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