The UK could become the world’s most attractive location for businesses using digital currencies, such as bitcoins, after George Osborne announced a new package of regulation for the nascent sector including anti-money-laundering rules.
Entrepreneurs have long complained that the lack of rules has made it hard for them to be accepted as legitimate, and there have been widespread reports of businesses being refused bank accounts. (Taxedo Limited – “not if businesses spoke to us – we provide banking services for and to the Bitcoin community”)
Digital currencies are a means of transferring money online. Bitcoin, the most well-known, was invented in 2009 and gained notoriety for wild price swings and as a medium of exchange for illicit means.
Critics warned of the risks posed by criminals exploiting the anonymity of transactions while advocates cheered the fact that digital currencies offered a decentralised way to make speedy and secure transfers.
Globally, the sector has attracted $660m in venture capital in the past three years.
Businesses welcomed the decision to regulate. The full scope and detail of any rules will be hammered out in the next parliament.
“It’s good to see the government listened and the recommendations are what we asked them for. The key sticking point was lack of money-laundering regulations,” said Tom Robinson, co-founder of Elliptic, a bitcoin storage service. “The regulatory clarity means hopefully banks will engage with us more.”
The Treasury acknowledged there were still risks from digital currencies and said law-enforcement agencies must have the power to pursue criminal activity and confiscate digital funds.
Questions also remain over the limitations of Bitcoin’s blockchain technology, which some have said would be unable to handle high volumes of transactions. The measures include £10m towards research into addressing this issue.
“The £10m in funding for digital currency research demonstrates that this government is serious about making the UK an attractive destination for cryptocurrency entrepreneurs and investment,” said Garrick Hileman, economic historian at the London School of Economics. “No other government has made such a positive overture to Bitcoin.”
Digital currencies held potential, the Treasury concluded in the results of a six-month review, not just for making payments but for their underlying technology, which many believe can be developed for use beyond financial services. The Bank of England is also looking at their usefulness to central banks.
Adam Vaziri of the UK Digital Currency Association, said: “The government’s response is fantastic for all of us in the industry and vindicates our position”.
Source: ft.com – thanks.
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