When can we expect the UK Bitcoin Regulations
The end of anonymity?
Innovation is often stifled by regulation and that is always the case, however, with bitcoin, this can have the surprising opposite effect. It is also known that bitcoin is hoarded by individuals who control the vast quantities. The spread of bitcoin wealth distribution is uneven compared to fiat currency, recent market turmoil has led to investors storing their wealth in bitcoin like gold.
Addressing anonymity is key if it’s to have a utility like the traditional fiat currency. Flat currency complied with the KYC/AML, therefore its use was free from doubt. However, bitcoin doesn’t have that assurance of dealing a transaction with fraudsters.
Bitcoin just like cash is another form of payments that is anonymous. The difference being this is electronic.
Will Regulation have a Positive or Negative Impact on Bitcoin?
The fourth Anti-Money Laundering directive has been updated to cover virtual currencies like bitcoin. In addition, the UK Treasury has followed suit, announcing it will also subject virtual currency exchanges to same regulations as the banking system. While this isn’t surprising, there are possible implications arising from these directives.
Virtual currencies are used benignly, but caution is required as it still has to shed off its shady reputation. Therefore, there is a need for regulation in order to prevent their “abuse” in the form of money laundering and financing terror networks and organisations.
Specifically, EC wants to bring virtual currency exchange under the wing of the Anti-Money Laundering Directive, forcing the bitcoin platforms to apply due diligence to customers, this will ultimately end the anonymity associated with these exchanges. This might be good news for bitcoin as shading its anonymity could paint over its bad reputation stain. Ideally, virtual currencies become “legit”.
When can we expect the UK Bitcoin Regulations? Soon, I Presume
The Bitcoin is indeed one of the technological revolutions, which enable countries to benefit from this technology and also position themselves early on the road to progress. In Europe, Germany took the opportunity to restructure and switching their position on digital currencies, even recognising them as account units.
However, in late 2013, being a bitcoin user or entrepreneur, wasn’t the best idea. Since VATs were being implemented on digital currency sales, moreover, few retailers knew about it and there were less exposure and awareness. Today, the UK is the ideal paradise for a bitcoin user or trader, courtesy if the Bitcoin community and the will to bolster “fintech” boom and to maintain the city’s global financial hub status.
Anti-Money Laundering Directive and the UK Treasury
In addition, the UK Treasury has followed suit, announced it will subject virtual currency exchanges to same regulations as the banking system, following closely in the footsteps of the fourth Anti-Money Laundering directive on virtual currencies like Bitcoin.
There is a need for regulation in order to prevent their “abuse” in the form of money laundering and financing terror networks and organisations.
Repercussions may arise from regulation
However, it may result in a negative effect elsewhere. In the many small fintech players who use virtual currency in their business to survive. These small companies will be forced to take this compliance burden. Since they are not yet profitable, this will be an arduous task. In addition, they will incur huge fines if they do or get it wrong.
All in all, in the move to push regulations to the bitcoin industry, governments will always be on two opposing sides. Convincing either side or dissuading them from their point of view is an arduous task since there really isn’t much of a middle ground to deep life philosophical opinions. Furthermore, with the possibility of the worst case scenario being both sides agreeing that Bitcoin technology should be outlawed.
For almost two years now, Bitcoin has been trading at its highest price, according to cryptocurrency experts. Moreover, Bitcoin has this unique feature where new coins are “mined” and added into circulation, clearly different from fiat currency being printed a new and added to circulation. When new coins are mined, a record is added into the blockchain. The blockchain is a giant ledger that records all bitcoin transactions.
Clearly, these are some of the arguments that are going to need serious consideration before ascension.
Only exchanges…for now
The proposed amendment only focused on one key area of the bitcoin industry, i.e. exchanges. In the bitcoin to fiat currency exchange, wallets and other firms not involved are excluded from the EU regulation, however, at a country level, things are changing.
The UK treasury did concur with its aim to control the bitcoin industry. This will mean that buyers would have to produce some identification, this makes tracking them much easier.
In European bitcoin exchanges, most of it is done by the book, that is, doing a risk-based due diligence of customers. This can be collaborated with there being no complaints in exchanges. However, the community hasn’t failed to point out concerns on terror networks and organisations funding their activities via virtual currency. Clearly, bitcoin anonymity is under threat here.
Future Plans and Developments
Over the coming years, in determining the future of digital currencies in the UK and even elsewhere. With the strong belief in the UK’s Legal and Regulatory Framework and the government, we believe conclusions to the review will be soon and we are closely monitoring the scenario.
In addition, if the government moves a step closer and legalise digital currencies we’ll most likely see and boom-bust in London’s financial sector.
However, it may result to a negative effect elsewhere. In the many small fintech players who use virtual currency in their business to survive. These small companies will be forced to take this compliance burden. Since they are not yet profitable, this will be an arduous task. In addition, they will incur huge fines if they do or get it wrong.
So a question exists, whether it is possible to merge the regulations with the preference for anonymity. The answer lies with the blockchain itself, the ledger that enables identity is built based on individual ID credentials. We can use the blockchain to create a “translucent ID” system involving a third party who’ll hold the ID like some sort of escrow. The ID details would be released under the specific or privileged circumstance. Indeed ID would effectively be “tokenized”.
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