Westminster Treasury Committee to examine regulation of digital currency

Bitcoin - Image credit: Pixabay

The House of Commons Treasury Committee has launched an inquiry into digital currencies and distributed-ledger technology, with the aim of establishing whether policymakers can and should regulate currencies such as Bitcoin.

The inquiry will look at the role currently played by digital currencies, as well the main risks they could pose to consumers, businesses and the public sector, with a particular focus on money-laundering, cyber crime, and volatility in financial markets.

The committee will also scrutinise what impact blockchain and other forms of distributed ledgers could have on the Bank of England and the financial services sector.

The ultimate aim of the probe will be to establish how policymakers and regulators should protect consumers and companies without stifling innovation.

Committee chair Nicky Morgan 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.”

First on the list of the key questions to be considered by the committee is whether or not digital currencies are “ultimately capable of replacing traditional means of payment”.

The committee will also ask how much the technology could disrupt the economy and the delivery of public services, and examine how the government might need to adapt its processes in areas such as taxation and anti-money laundering activities.

The inquiry comes following a headline-grabbing period of wild fluctuation in the value of Bitcoin.

A year ago, one unit of the cryptocurrency was worth under £1,000.

Its value rose steadily for the rest of 2017, before exploding in the final two months of the year.

Between 12 November and 17 December, the exchange rate for one bitcoin more than trebled, from £4,379 to £14,592.

But before the new year, this had fallen back to less than £10,000, and the early weeks of 2018 brought an even more precipitous drop, as the cryptocurrency fell to £4,308 at the beginning of February.

Treasury Committee member Alison McGovern 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.”