In the UK’s 2015 Budget, George Osborne announced a number of policies relevant to digital currencies:
- the Government’s intention to apply anti-money laundering (AML) regulation to digital currency exchanges in the UK, in order to support innovation and prevent criminal use;
- the Government will invest £10 million in research to address the research opportunities and challenges for digital currency technology; and
- work with the British Standards Institution and the digital currency industry to develop voluntary standards for consumer protection
We think that this is great news for the Bitcoin industry (and other digital currencies) in the UK. A set of voluntary standards means that institutions can choose to sign up, which is likely to lead to more trust from consumers, or choose not to, in which case they would be more free to innovate. Of course, if Bitcoin gets wider take-up from retail consumers, even as far as being systemically important, then regulation will undoubtedly become more stringent, but this seems like a sensible middle ground for promoting the UK as a centre for fintech whilst still giving consumers some protection.
Signing up to standards and having AML requirements in place may also mean that banks, traditionally averse to the idea of even giving bank accounts to Bitcoin companies, might feel more able to offer banking services.
The research element is a clear indication that the UK is committed to this area. The Bank of England had already identified the distributed ledger as a possible research topic in its OneBank research agenda. Determining ways of making the blockchain technology work so that it can handle high volumes of transactions, or even alternative uses of the technology beyond payments, would be very exciting for the UK and innovation.