UK Treasury Committee launches inquiry into digital currencies, DLT

Maria Nikolova

The Treasury Committee will examine the risks that digital currencies could generate for consumers, businesses, and Governments, such as those relating to volatility, money laundering, and cyber-crime.

The UK Treasury Committee is today opening a new inquiry into digital currencies and distributed ledger technology (DLT). The inquiry will examine the role of digital currencies in the UK, including the opportunities and risks that digital currencies may generate for consumers, businesses, and the Government. It will look into the potential impact of DLT – such as blockchain – on financial institutions, including the central bank, and financial infrastructure.

It will also scrutinise the regulatory response to digital currencies from the Government, the Financial Conduct Authority, and the Bank of England, and how regulation could be balanced to provide adequate protection for consumers and businesses without stifling innovation.

Commenting on the launch of the inquiry, Rt Hon. Nicky Morgan MP, Chair of the Treasury Committee, said:

“People are becoming increasingly aware of cryptocurrencies such as Bitcoin, but they may not be aware that they are currently unregulated in the UK, and that there is no protection for individual investors.

Alison McGovern MP, Member of the Treasury Committee, said:

“This inquiry comes at the right time, as regulators and Governments wrestle with recent events in cryptocurrency markets. New technology offers the economy potential gains, but as recently demonstrated, it may also bring substantial risks.

It is time that Whitehall and Westminster understood cryptocurrency better, and thought more clearly about the policy environment for blockchain technology.”

Less than a fortnight ago, Lord Bates, stated that “the Government has no plans at this time to put an age limit on trading or investing in digital currencies.”

He added that the Government recognises the significant benefits that digital currencies and the related technology could bring, as well as potential challenges. The Government is monitoring the situation, and believes any regulation should be proportionate and risk-based, he said.

In November last year, HM Revenue and Customs said it had no plans to permit to UK taxpayers to pay their taxes in digital currencies. Lord Bates has also provided some information regarding taxation for the digital currency sector and any potential reforms in this aspect. He explained that “gains made on digital currency are currently chargeable at the normal Capital Gains Tax rates, depending on the facts of the case”.

The information was provided shortly after Lord Bates clarified the position of the UK Government regarding the possible regulation of digital currency businesses. On November 21, 2017, he said that the Government was negotiating amendments to the 4th Anti-Money Laundering Directive set to bring virtual currency exchange platforms and custodian wallet providers into the scope of Anti-Money Laundering and Counter-Terrorist Financing regulation. This will require such firms to conduct due diligence upon their customers, with their activities being overseen by national competent authorities for these areas, he added. The UK Government supports the intention behind these amendments.

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