More and more countries are trying to impose some sort of regulation on Bitcoin, US, China, India even Italy made digital coins look like hard fiat cash in the sense of law. However, in UK government institutions are not rushing to intervene.
Eitan Jankelewitz, who works as a technology lawyer in London stationed media law firm Sheridans. Eitan shows how the Bitcoin is running wild in UK that decided to let the cryptocurrency businesses to regulate themselves. Lets see where did that lead.
There are numerous jokes about “British scientists” but every joke has a grain of truth. Since the times when Albion served the role of headquarters to British Empire, London was considered a technological and financial center of the world. Times went by and even though most would call Wall Street and Silicon Valley the financial and technological kernels of the world, accordingly, the Britain’s reputation of always being on the edge of technological breakthrough is as strong as ever.
Bitcoin is exactly what UK is famous of being an expert in – technological advancement in financial area. In spite of this, officials tend to not leave a single breadcrumb for the businessmen on the corresponding issue, even though Britain is one of the most prominent suppliers of various Bitcoin products and services.
Eitan divides the required regulation into four required domains. These are: money laundering, consumer protection, foreign policy and the headache of all economists – taxes.
I would like to start with the tastiest piece, which is being money laundering. What Eitan says may seem strange and uncanny, but for the moment it’s not the government institutions that chase businesses to inflict limitations. Instead, the business owners are running around asking for some guidelines on how far they should go with their clients.
So, to prevent money from being laundered the UK has so-called Money Laundering Regulations 2007 that shows exactly why, how and when should the specific steps of prevention be applied to the businesses. There are many institutions that are responsible for this area but among them HM Revenue & Customs (HMRC) and Financial Conduct Authority (FCA) stand out the most. Thus, one should expect a heavy stare of these entities over the shoulder, but no, the firms working with digital currencies are left on their own.
That is why most of the businesses are creating their own framework to get the grip on the identity of their customers and sometimes imposing even more regulations on them than companies that do not work with cryptocurrencies. It makes sense though; nothing is forever and especially officials’ ignorance regarding money laundering. Hence, businesses are getting their users to participate in all kinds of identity control, so that when the bell tolls, they would not have to rework their whole user bases.
Now that we got this out of our system it’s time to speak about consumer protection, what Eitan started with.
Well, putting it simply there is no official customer protection on behalf of UK government for the Bitcoin or any other altcoin users. The institution that regulates this is, again, FCA. This facility refuses to associate it with business involved with digital coins.
It is no secret that despite the scientific and financial advancements, Britain is a conservative country that isn’t keen on letting go its traditions. One of these apparently is the self-regulation and seem like it work. Many firms that took on Bitcoin have informed Eitan that they are acting according to the FCA, even though there is no necessity to do so. Sometimes the situation even proved to be, well, ridiculous:
“There was even one instance where, allegedly, the FCA, on discovering that a bitcoin business had managed to add itself to an FCA register, politely invited that business to de-register itself,” – shared Eitan.
The third and usually the most tenaciously imposed regulation is the one considering taxes. Here the ignorance changed to an overkill, but lets not go ahead of ourselves. HRMC have been receiving plies for advice, how to manage Bitcoin transactions and services according to value added tax (VAT) ever since the popularity of digital coin went through the roof. Something like five month ago, the institution decided to fulfill the requests by announcing that Bitcoin should work like the single-purpose face-value voucher.
This implies that any cryptocurrency transaction should be charged with VAT. This time the businesses did not rush to accept regulation as such policy rendered exchanges stationed in UK useless, if they wanted to do everything by the letter of law of course. Thankfully, Eitan was invited on a meeting with HRMC. That allowed he to explain what such regulation means for Bitcoin. HRMC agreed on the unpleasant effects of their previous guidance and decided to discard it until they think of something that works.
Eitan speculates that VAT would be charged on the commission of Bitcoin not on the amount traded.
The last and, probably the least of UK’s concerns is foreign regulation. Despite the fact that Britain prefers to trust its market to be self-regulated, this does not release businesses that provide services across borders and beyond from the answer to the laws of other countries. Especially this is true speaking of US, which gained a habit to spread the influence of its laws across the globe.
For example, the recent decision of Washington requires the digital currency exchange operating on the territory of the USA to have special licenses and expensive registrations. Eitan believes that this is not a reason to be bothered, as UK businesses most probably turn their back on US until the situation is changed.
In the end of the article, Eitan concludes that the lack of regulation did not do as much good as it hamstrung many Bitcoin businesses. The main problem though are the banks. Their distrust is completely logical as without local regulation it is not clear what to do on the global scale.
That said, the Bitcoin is yet to demonstrate the maximum of its capabilities but until the certain legal framework is fixed, it won’t.