The U.K. government has reportedly announced plans to tighten regulations on bitcoin and cryptocurrency trading. It’s a sign of increasing scrutiny for digital assets, after 2017’s price boom made many small-time holders suddenly wealthy. Bitcoin and most other cryptocurrency prices dropped slightly as the news spread.
At press time, most asset prices had rebounded and BTC currently sits at $11,380 USD.
How Much Will the UK’s Plans Affect Bitcoin Trading?
The Telegraph reported plans by the U.K. Treasury department to require traders to “disclose their identities and report suspicious activity”.
That doesn’t sound too dramatic on the surface, and the new rules are an E.U.-wide plan. But John Mann of the Treasury select committee also hinted there could be a formal government inquiry into possible nefarious uses for cryptocurrencies and trading platforms:
“These new forms of exchange are expanding rapidly and we’ve got to make sure we don’t get left behind – that’s particularly important in terms of money-laundering, terrorism or pure theft.”
“I’m not convinced that the regulatory authorities are keeping up to speed. I would be surprised if the committee doesn’t have an inquiry next year. It would be timely to have a proper look at what this means. It may be that we want speed up our use of these kinds of thing in this country, but that makes it all the more important that we don’t have a regulatory lag.”
Most Exchanges Already Monitor IDs, Activity
Since 2013, most bitcoin and digital asset exchanges have demanded identity documents from new account holders. Those who didn’t, such as BTC-e, made themselves targets for government crackdowns.
However many cryptocurrency-only exchanges, who don’t handle fiat or touch bank accounts, still do not require ID or real names.
Countries like Japan have already implemented similar rules for exchanges and other online services, like payment processors. Bitcoiners have described it as a double-edged sword — official recognition brings legitimacy and investment, but it turns cryptocurrency into something resembling the mainstream financial system.
Fighting Crime vs Protecting Financial Privacy
Governments around the world have regularly expressed concern that bitcoin and cryptocurrencies are used to facilitate financial crimes like money laundering, tax evasion, and payment for criminal activities like drugs and ransomware.
Bitcoiners counter that regular fiat currency is far more popular with criminals. However those transactions are also monitored by governments, who fear a lack of control over open blockchain systems.
Their concerns are perhaps legitimate — from a government’s point of view, anyway. No doubt there are many crimes the authorities could solve more easily with full access to everyone’s affairs, on and off-line, financial and otherwise.
The war between law enforcement, technology and privacy rights will likely rage on for years.
What will be the longer-term impact of such regulation? Let us know in the comments.
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