Setting out its approach to digital currency, the UK government has vowed to start applying anti-money laundering regulation to exchanges but also promising to put cash behind research into the potential of blockchain technology.
Last August the government outlined plans to look into the risks and benefits of digital
Money laundering rules for digital currency to be put in place by UK government
currencies and their underlying technologies. This was followed up by a call for information, which received more than 120 responses from developers, banks, payment schemes and others.
On the day Chancellor George Osborne delivered his budget, the Treasury published its response as it promises to “create a world-leading environment for the development of innovative payments and financial technology”.
Noting the “significant future promise” of the distributed ledger technology underpinning digital currencies, the report says: “The government wishes to foster a supportive environment for the development of legitimate businesses in the digital currency sector so that the UK can see some of the benefits of digital currencies, while also creating a hostile environment for illegal activity.”
To bring bitcoin into the regulatory fold, the government says that it plans to apply AML regulations to digital currency exchanges, promising a consultation early in the next parliament on how the rules should be applied and the identity of the regulator.
In addition, the government says it will work with BSI (British Standards Institution) and the digital currency industry to develop voluntary standards for consumer protection.
Meanwhile, a new research initiative is being set up, bringing together the Research Councils, Alan Turing Institute and Digital Catapult with industry to “address the research opportunities and challenges for digital currency technology”. The government is putting up an additional £10 million to support this.