In recent months there has been a growing number of high profile organisations which have announced that they are beginning to accept payment for goods and services in cryptocurrencies alongside more traditional means. PayPal is also soon to enable its users to hold, sell and buy cryptocurrencies (including Bitcoin, Ethereum and Litecoin) via its payment platform. However, despite this increase in uptake and perceived movement towards the mainstream, some commentators believe the limited amount of UK cryptocurrency regulation poses enormous risks to consumers and could lead to huge losses in missed tax revenue for the Government.
It is believed that without new measures assets may be illegally concealed or removed from UK companies and criminals will continue to exploit the anonymity of cryptocurrency transactions for money laundering & terrorist financing purposes. Interestingly, it seems that the UK public may be broadly receptive to the idea of additional rules being put in place, with a recent survey showing 4 in 10 respondents would support the introduction of a legal framework for the regulation of cryptocurrencies.
As a backdrop to this, the HM Treasury is currently reviewing feedback from a consultation it published in January 2021 into its proposed regulatory approach for cryptoassets. In overhauling the regulatory landscape, the Government aims to protect financial stability, deliver robust consumer protections, promote competition & innovation and support the UK's global competitiveness. In doing so, initially it proposes to leave volatile cryptocurrencies (such as bitcoin) largely outside of its regulatory orbit and instead focus on so called "stablecoins" which tie their value to an external asset. The decentralised nature of cryptocurrency transactions has created unique considerations for their effective regulation.
It seems the greatest challenge for the Government will be to design laws which protect businesses and consumers without stifling the use of cryptocurrencies as a means of payment. Well drafted regulation may provide many more businesses with the confidence to provide goods and services in exchange for cryptocurrency, poor regulation may deter them entirely - it will be fascinating to see how this develops.