Bitcoin and cryptocurrency anonymity may be coming to an end for many Europeans after actions by EU and UK politicians who want to regulate cryptocurrency exchanges under anti-money laundering and anti-terrorism finance initiatives. The crackdown is motivated by concerns that cryptocurrencies may soon become a financial tool for tax evasion and criminal enterprises.
Cryptocurrencies Kick Off
Bitcoin and other cryptocurrencies like Ethereum have seen huge increases over the last year. Bitcoin has increased more than 12 fold in 2017 and Ethereum has seen similar increases. Many proponents of cryptocurrencies see the currencies as a better and more transparent system than government issued fiat currencies.
The currencies are relatively untraceable and it’s difficult to know who owns which coins. This makes the coins particularly valuable for transactions on the darknet or outside normal financial channels. There are no international controls on the movement of Bitcoins from one country to another. In fact, the Chinese have been prolific miners and traders of Bitcoin because the coins represent one of the easiest ways to circumvent Chinese currency controls.
UK Treasury to Regulate Cryptocurrencies
The UK Treasury is working alongside EU officials to craft an EU wide policy to regulate cryptocurrency exchanges within the next few months. Exchanges will be required to perform due diligence on their clients as well as report any suspicious transactions to relevant authorities. Exchanges and wallet providers will both fall under the proposed regulation.
Bitcoin dropped on news that UK and EU regulators were planning to regulate exchanges, but the drops were not significant and Bitcoin quickly recovered most of the losses. One line of thinking is these actions will not have a significant effect on the market. Users can easily cross borders to do their exchanges and those exchanges outside the jurisdictions of the UK or EU will increase their market volume. The end result is that UK and EU exchanges may not be able to compete with international exchanges.
Nevertheless, members of the UK Parliament have also begun discussing ways to regulate cryptocurrencies in the UK. They are discussing what kind of regulatory framework should be adopted to control and regulate the exchange and use of cryptocurrencies in commerce. There is significant fear that these cryptocurrencies will be used to facilitate criminal activities including drugs, terrorism, tax evasion, and outright theft. The overwhelming sentiment seems to be that the government needs to regulate and control these cryptocurrencies. MPs have admitted that they don’t want to be left behind in the rush to regulate and control computer-based currencies.
MP to Tax Bitcoin
Cynics have suggested that the MPs are primarily interested in taxing Bitcoin and ensuring that it can contribute to the financial well being of Her Majesty’s Treasury.
Even leading banks like JP Morgan and Goldman Sachs have sounded the alarm that Bitcoin is a 21st-century vehicle to commit fraud and other financial crimes. They have encouraged the government to regulate cryptocurrencies so that they can better compete with cryptocurrencies.
Regardless of the outcome of new measures to control and regulate Bitcoin, there is scant evidence that Bitcoin is slowing its relentless increase in value. Whether the measures actually provide a better and more controlled environment for Bitcoin, Ethereum, and other currencies remains to be seen. Nevertheless, the need for tax revenue among governments like the UK and the EU means that Bitcoin can’t be overlooked.