UK Treasury to Regulate Digital Currencies because of Possible Money-Laundering Activities
So far, there have been numerous reports and statements saying that bitcoin has the potential to be used for tax evasion, money laundering and financing of illegal activities. Despite the small percentage of people using it for this purpose, the British Government recently announced that it is planning to strictly regulate digital currencies in order to prevent such events.
With this in mind, the regulation effort will be led by the UK Treasury, which will adopt current counter-terrorism and anti-money laundering legislation to cover cryptocurrency use as well. According to a spokesman from the UK Treasury: ‘We have clear tax rules for people who use cryptocurrencies, and like all tax rules, these are kept under review. We also intend to update regulation to bring virtual currency exchange platforms into anti-money laundering and counter-terrorist financing regulation.’
Once the statement was issued, numerous media outlets talked about a possible crackdown on digital coins, due to the change of regulatory framework. At this time, most people expect that this ‘crackdown’ refers to strictly regulating digital currency exchanges, and making sure that they use Know-Your-Customer protocols, and report any suspicious activity to the relevant authorities.
According to Inspector Tim Court, of the London Police, drug dealers can potentially launder money via digital currency ATMs, in order to quickly dispose of dirty cash. At this time, there are a total of 77 digital currency ATMs in the UK, which allow people to exchange cash for cryptocurrencies such as Bitcoin, Ethereum or Litecoin.
So far, it seems that the UL Government is negotiating a few amendments that would be made to the 4th Money Laundering Directive. This means that virtual currency exchanges alongside with wallet providers might come under the Counter-Terrorist Financing and Anti-Money Laundering Act. In return, activities will be overseen by authorities. It is also expected that these regulations will be finished up in late 2017, or early 2018.
Another spokesperson for the Treasury, stated that: "We have clear tax rules for people who use crypto-currencies and like all tax rules, these are kept under review (…) We also intend to update regulation to bring virtual currency exchange platforms into anti-money laundering and counter-terrorist financing regulation."
Based on everything that has been outlined so far, the new regulation will not directly affect digital currency users, yet supervision on the market will be present.