The UK Treasury has said that Anti-money laundering regulations should be updated to include Bitcoin and other virtual currencies.
The Metropolitan Police says criminals are using crypto-currency cash machines to launder money in London.
The government’s aim is part of a broader update to the EU rules which are under negotiation.
The update, revealed in Parliament last month, would mean that traders would no longer be able to operate anonymously.
Bitcoin expert Dr Garrick Hileman, a research fellow at the University of Cambridge, said that in jurisdictions such as New York, crypto-currency is already subject to tighter regulation.
“I think these announcements have a powerful signalling effect and put the industry on notice that the ‘cop on the beat’ is concerned and watching crypto-currencies more closely now,” he said of the Treasury news.
“This in turn will motivate companies to more effectively self-police bad actors.”
At a press briefing, Scotland Yard warned about the currencies’ popularity among criminals.
“Organised criminal groups have been early adopters of crypto-currencies to evade traditional money laundering checks and statutory regulations,” said Det Supt Nick Stevens, from the Serious and Organised Crime Command.
“Criminals have also used crypto-currencies to purchase illegal commodities on dark market sites with anonymity.”
A Treasury spokesman said that there were already “clear tax rules” for legitimate crypto-currency users.
“We also intend to update regulation to bring virtual currency exchange platforms into anti-money laundering and counter-terrorist financing regulation,” he added.