NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Friday, March 20, 2015

Britain took a significant step towards becoming a global bitcoin hub on Wednesday as the government announced it would regulate digital currencies for the first time by applying anti-money laundering rules to exchanges.

Already the center of the $5-trillion-a-day market for traditional currencies, the UK is fast emerging as a center for digital currencies too, cementing its place as European’s financial technology, or “FinTech”, capital.

In a report published alongside finance minister George Osborne’s annual budget statement, Britain’s Treasury said the new regulation would support innovation and prevent criminal use of digital currencies. The proposals will be consulted on early in the next parliament.

Tom Robinson, co-founder of Elliptic, the world’s first bitcoin insurance vault in London, and a board member of the UK Digital Currency Association, said the new regulation effectively served as a “stamp of approval” from the government.

“It provides enough oversight to provide legitimacy without stifling innovation,” he said. “I think it is a good balance between on the one hand the U.S. and specifically New York, which I think have gone too far, and what a lot of countries are doing which is just completely ignoring it.”

The potential for digital currencies to be used for illicit financial transactions has led many to steer well clear of the them. They were dubbed the “Wild West” of finance by U.S. regulators last year, since they are not backed by a central bank or government like conventional money.