07 April 2015
The UK government is to regulate cryptocurrencies such as Bitcoins to tackle money laundering.
In putting together a series of measures, the government aims to address key criminal and consumer protection risks associated with the use of digital currencies. A full consultation detailing the regulatory approach has been proposed for the next Parliament and will include: how anti-money laundering regulation should be applied to the digital currencies sector; the scope of the regulatory perimeter; and the identity of the regulator.
The government is hoping the regulations will enable digital currencies to be used as an innovative alternative payment option in the UK, and to compete with existing models.
However, speaking to Governance + Compliance, Piyush Pant, Vice President of Strategic Markets at MetricStream says that he doesn’t believe the regulations will substantially impact the adoption of the digital currencies in the UK.
He says that in order for the digital currencies to work, we would need to know whether the currencies represent a reliable store of value – something which is still unclear. ‘For example, the volatile nature of Bitcoin means its value can change dramatically – will businesses ever know their true financial position?
‘Furthermore, what impact would a mixture of currencies (crypto and sterling) have on accounting rules? These uncertainties will create new risks for businesses, and will require advanced scenario analysis to determine their potential impact. Ultimately, until a critical number of businesses feels comfortable, regulated or not, we are unlikely to see wide adoption of cryptocurrencies.’
This is a view Kevin Dallas, Chief Product Officer at Worldpay shares: ‘Concerns over price volatility and security have limited the acceptance of digital currencies in mainstream commerce’, adding that ‘for now most UK merchants are still at pains to see how buying into digital currencies will benefit them’.
On the other hand, Dr Tom Robinson, COO of Elliptic and founding board member of the UK’s Digital Currency Association (UKDCA), says: ‘We believe bringing digital currency exchanges within the money laundering regulations will bring much-needed legitimacy and clarity to the industry, which we hope will encourage banks to engage more with digital currency businesses.’