Treasury targets Bitcoin criminals
MINISTERS are launching a crackdown on Bitcoin, the virtual currency, amid concern it is being used to launder money and dodge tax.
The Treasury has disclosed plans to regulate Bitcoin that will force traders in so-called cryptocurrencies to disclose their identities and report suspicious activity.
Until now, anybody buying and selling Bitcoins and other digital currencies have been able to do so anonymously, making it attractive to criminals and tax avoiders.
But the Treasury has now said it intends to begin regulating the virtual currency, reckoned to have a total value of £145billion, to bring it in line with rules on anti-money laundering and counter-terrorism financial legislation.
The new rules, which will be applied across the European Union, are expected to come into force by the end of the year or early in 2018, the minister in charge has said.
The changes come amid fears that Bitcoin is being used by gangs to launder the proceeds of crime, while also attracting currency speculators. The value of Bitcoins has risen 12-fold this year, with a single unit increasing in value from about £720 in January to currently trade at £8,700.
Amendments to existing Eu-wide legislation will see exchange platforms, where digital currencies are bought and sold similar to a bureau de change, and wallet providers, where virtual currencies are stored similar to a bank, obliged to report suspicious transactions and carry out due diligence on customers. That means the identities of users will no longer be anonymous.
Stephen Barclay, the Economic Secretary to the Treasury, revealed plans to change the legislation in a parliamentary answer, issued last month but which had gone unnoticed. Mr Barclay said: “The UK Government is currently negotiating amendments [to the antimoney laundering directive] that will bring virtual currency exchange platforms and custodian wallet providers into anti-money laundering and counter-terrorist financing regulation, which will result in these firms’ activities being overseen by national competent authorities for these areas.
“We expect these negotiations to conclude at EU level in late 2017/early 2018.”
A Treasury spokesman last night confirmed the plans.
John Mann, a member of the Treasury select committee, said: “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.”
Alister Jack, a Conservative member of the committee, agreed on the need for an inquiry into alternative currencies, saying: “There is no doubt that it’s something we should look into.”
In May, parts of the NHS as well as organisations around the world were brought to a standstill by computer hackers who demanded a ransom paid in Bitcoins to unlock computers.
Larry Fink, the chief executive of Blackrock, the global investment firm, has claimed that Bitcoin is an “index of money laundering”, adding: “Bitcoin just shows you how much demand for money laundering there is in the world. That’s all it is.”
The Financial Conduct Authority
(FCA), the City regulator, has warned consumers against speculating on the price of virtual currencies. The FCA described financial spread bets on the value of cryptocurrencies as “extremely high risk” and to be avoided by all but experienced investors.
Andrew Bailey, the FCA’S chief executive, said: “Bitcoin is a commodity in my view, it’s not a currency. ” He described its pricing as “very volatile”.
Chris Evans, a Labour MP who has campaigned for regulation of Bitcoin and other currencies in the wake of the NHS ransomware attack, said: “We need to crack down on the criminal gangs trading in Bitcoins. There is a Wild West element at the moment.”
Supporters of digital currencies insist that they are a legitimate means to buy and sell goods without resorting to national currencies that are subject to exchange rate fluctuations.
Dr Costantino Grasso, a business management and law lecturer specialising in money laundering at University of East London, said that the number of Bitcoin users was estimated at about five million worldwide. It was unclear how many of them are in the UK, but Dr Grasso suggested the British market was one of the strongest in the world.