MPs in London have announced a full-scale inquiry into cryptocurrencies. This has been long expected, but the announcement also states that the underlying technology and ledger system – blockchain – will also be part of the inquiry. The widespread opinion is that the results of this inquiry will pave the way for Bitcoin regulation in the UK, as the government take a cautious stance as to whether Bitcoin and its fellow cryptocurrencies pose a lasting threat to the central banking system.
The UK has maintained a cagey relationship with crypto since its explosion last year. The Governor of the Bank of England, Mark Carney, stated on record that Bitcoin had failed as a currency. Now, Nicky Morgan, the Chair of the Treasury Committee, has turned her focus to unpicking the potential uses – and threats – that cryptocurrencies might pose:
People are becoming increasingly aware of cryptocurrencies such as Bitcoin, but they may not be aware that they are currently unregulated in the UK, and that there is no protection for individual investors… The Treasury Committee will look at the potential risks that digital currencies could generate for consumers, businesses, and governments, including those relating to volatility, money laundering, and cyber-crime.
However, the second part of Mark Carney’s assertion about cryptocurrencies was an acknowledgement that blockchain technology itself has proven to be of potential value, and Ms Morgan went on to acknowledge this in her statement:
We will also examine the potential benefits of cryptocurrencies and the technology underpinning them, how they can create innovative opportunities, and to what extent they could disrupt the economy and replace traditional means of payment.
The use of the word “innovative” suggests that the government directive is to support startups looking to use blockchain creatively, but the word “disrupt” implies that there is some fear and concern in the government, that cryptocurrencies at the very least, could destabilize the economy.
The committee will be investigating a few key questions. They will look at the capability of digital currencies when it comes to replacing or working alongside traditional forms of payment, whether they could disrupt the economy, what the risks are for individuals, businesses and the government itself, whether there are any good examples to follow from overseas, and whether regulation could help protect investors and startups alike.
When they look overseas, it is a mixed bag, but they are likely to look to the US and East Asian allies such as Japan and Korea, rather than those countries that are politically opposed, such as Russia and China. This could point to a semi-regulated model, which would allow the operation of exchanges, but with a few requirements around anonymity and the obligation to pay large amounts of tax. A potential model would be like South Korea, who have imposed age restrictions and refused to allow 100% anonymous accounts.
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What direction do you think the British government will go in? Regulate, leave alone or ban completely? Let us know your thoughts.