UK government review looks for Bitcoin's role in British business
The UK government says it will assess the benefits and risks of unregulated digital currencies, a move which one expert says is a play to siphon investment and jobs away from the US and other markets.
The UK government has said it will launch an investigation into the role of digital currencies like Bitcoin in the British finance system.
Bitcoin is a digital currency, introduced in 2009, that lets users pay for goods and services from a computer or phone, independent of any bank. Each virtual coin is represented by a unique number. The increasingly high-profile currency has become popular with some sites and retailers, but isn't regulated by any financial body.
The review was announced at the launch of new financial technology body Innovate Finance in London's Canary Wharf by chancellor George Osborne, The Guardian reports. The newspaper says a study that details the role virtual currencies could play in British business is due in the autumn.
"The chancellor's announcement today is a much needed boost for bitcoin in Britain," said Garrick Hileman, economic historian at the London School of Economics. "The chancellor is no doubt aware that very little of the $250 million of venture capital which has been invested in Bitcoin startups to date has gone to British-based companies.
"Many people believe Bitcoin will be as big as the Internet," Hileman says. "Today's announcement from the chancellor has the potential to be a big win for the UK economy."
Asked whether the UK government was likely to try and regulate Bitcoin, Hileman replied, "While I do expect the UK to regulate Bitcoin I wouldn't be surprised to see a more 'light touch' approach than what's happening across the pond [in the US]."
Last year New York state regulators issued subpoenas to several people and companies associated with virtual currencies, with the state's Department of Financial Services saying that if virtual currencies remain a "virtual Wild West" it could threaten the US' national security.
"The bottom line on today's announcement," Hileman says, "is that Osborne thinks he's spotted an opportunity for the City and Silicon Roundabout to siphon investment and jobs away from the US and other markets which are taking a more aggressive Bitcoin regulatory posture."
Some, however, note that too much government involvement in Bitcoin could prove detrimental to the currency's success. When asked about the challenges of regulating digital currencies, Nathan Lands, founder and CEO of Bitcoin sharing service QuickCoin told CNET, "Most governments don't completely understand crypto-currencies yet -- and most definitely would make major mistakes in enforcing regulations."
"Overly regulating digital currencies can stem innovation, causing companies to go to other countries that are more open to digital currencies and thus representing a major loss to the country that imposed regulations," Lands said.
In April Amazon said it has no plans to start accepting Bitcoin as payment.