UK Has No Firm Plans for Bitcoin Regulation Beyond Brexit
The UK government has shown no signs of urgency in regulating the market.
The UK government has no firm plans for regulating the cryptocurrency market after Brexit - while investors and traders have questioned whether a crackdown on alleged criminal activity is either necessary or workable.
With countries such as China, South Korea, Germany and France taking a tough line on the supposed associations between cryptocurrency and international crime and terrorist syndicates, the UK has been keen to follow suit.
In November, it announced that it planned to adopt new European anti-money laundering laws which tighten controls on trade in Bitcoin and other cryptocurrencies. The new regulations, due to come into force in the spring, also target the use of virtual currencies to fund terrorism. Amongst other measures, the rules will prevent anonymous trading at EU-based exchanges.
But with the UK’s departure from the EU in March 2019 a little over a year away, questions have been raised as to what the timetable will be for replacing EU controls with domestic regulations. In December, John Mann MP, member of the House of Commons Treasury Select Committee, said he expected the government to launch an enquiry to address the issue.
Spokespeople for both the Treasury Select Committee and the government told Cryptonews.com, however, that no timeframe for an inquiry had yet been agreed.
A Treasury spokesperson said: “The government recognises the potential benefits that virtual currencies and the related technologies could bring, as well as potential risks, for example within money laundering and terrorist financing.”
However, some industry insiders question whether regulation to counter criminal activity should be the priority.
“There's no doubt that fraudsters like cryptocurrency - it's a great way to get irreversible, liquid ‘money’. However, full on money laundering or major criminal activity isn't anything we see here at all; Bittylicious isn't really the place to do this as the values aren't typically huge,” Marc Warne, director of online cryptocurrency trading site Bittylicious, told Cryptonews.com
“In essence though, in the UK, there is no regulation at all, which I believe is a sensible starting point while we see where the industry is headed,” he added.
However, the only issue he sees regarding Brexit until concrete plans are in place is that it will probably be more difficult to open bank accounts in Europe or deal with European entities (including exchanges) if there is no common legal system.
One UK-based investor, who did not wish to be named, also questioned how effective national regulation of international virtual currencies could be anyway.
“It's important to note that the governments can only ever regulate the fringes. They can only regulate where Bitcoin meets the traditional banking sector. They can never regulate the network itself. That's a key distinction because once money is ‘inside’ Bitcoin, it is free from any financial regulation whatsoever, and it will almost certainly remain that way,” he said.
He also points out that centralised exchanges have adopted know-your-customer laws and they aren't really anonymous anymore.
The UK government has shown no signs of urgency in regulating the cryptocurrency market to date.
In 2014, then Chancellor George Osborne said that the lack of clear regulation to prevent criminal use of cryptocurrencies posed a barrier to exchanges setting up in the UK. He proposed bringing the market under the remit of domestic anti-money laundering controls back then.
Two years later, the government decided instead to adopt new EU proposals to include digital currencies in its own revised anti-money laundering and counter-terrorism funding legislation. It took until late last year for political agreement to be reached on the nature of those regulations, ready for implementation this spring.
Warne also said cryptocurrency companies were being turned away from voluntary anti-money laundering schemes set up and run by Her Majesty’s Revenue & Customs (HMRC), the UK tax authority.
“We had previously voluntarily registered under HMRC's Money Laundering Regulations scheme as we believe they are sensible,” he said. “HMRC has since informed us that they do not regulate cryptocurrency businesses so this registration is no longer applicable. This is the case for all cryptocurrency businesses in the UK.”
Meanwhile, seven of the largest crypto companies are forming a UK cryptocurrency trade body CryptoUK, bringing in the first self-regulation for the sector, The Telegraph reported.
The companies said they hoped the regulations would form the first part of broader UK rules around volatile cryptocurrency trading, according to the report.