Considering the UK to be a financial center globally, especially London, we might wonder that they are quite keen about bitcoin and other digital currencies. Digital currency is, after all, the ultimate example of a finance/technology hybrid. Well, you would be right.
However, anti-money laundering regulations should be updated to include Bitcoin and other virtual currencies, the UK Treasury has said. The Metropolitan Police says criminals are using cryptocurrency cash machines to launder money in London. The government’s aim is part of a broader update to the EU rules which are under negotiation. The update, revealed in Parliament last month, would mean that traders would no longer be able to operate anonymously.
The UK has laid down laws relating to cryptocurrencies for:
- Consumer protection: FCA is the regulator with responsibility for ensuring that financial services are provided in a way that protects consumers and maintains the integrity of the market.
- Prevention of money laundering: The prevention of money laundering is taken very seriously in the UK and indeed in many countries around the world.
- Taxation: For once UK businesses were happy to have no regulation. We were told that VAT would most likely be charged on bitcoin service charges, but not bitcoin itself. Therefore an exchange would have to charge VAT on its commission, but not on the bitcoins traded.
- Foreign regulations: Just because there is so little regulation in the UK, it doesn’t mean that UK businesses aren’t affected by foreign laws. Regulations in the US have a habit of reaching beyond the borders of the 50 states.
The lack of regulation in the UK has caused more problems than opportunities for bitcoin businesses. The biggest problem regarding bitcoin in the UK is– access to UK banking services. In short, there isn’t any. With the regulatory picture unclear, banks consider it too risky to offer bitcoin businesses a bank account.
In jurisdictions around the world, lawmakers and regulators are considering if and how to bring digital currencies under their regulatory frameworks.
Until the inevitable question of regulation is settled, one way or another, digital currency businesses will be unable reach their true potential.