United Kingdom Take a Step Forward in Regulation of Digital Currencies

Digital currencies are beginning to rise quickly in popularity with consumers increasingly looking into digital currency as a means of payment. The UK government, in their most recent budget report have announced their plans to support innovation in the nascent technology, whilst taking steps to prevent criminal use. Similar to the Consumer Financial Protection Bureau (CFPB), who recently proposed rules to help the development of the prepaid industry, the UK government are seeking to create an environment that will allow digital currencies to flourish whilst making it ‘a hostile environment for illicit users of digital currencies’.

At the beginning of March, cash was overthrown as the leading method of payment in the UK. More transactions were made digitally by credit, debit, or via other cashless methods than paying with cash. Predictions in 2023 show that digital transactions will have risen to a staggering 27 billion per year with cash being around 13 billion. With digital set to continue to be the leader in payments, the UK Treasury have seen the need for new regulation.

The main aim, just like with the CFPB’s new proposed rules, look closely at consumer protection as digital currencies in the past have been linked with many criminal activities. The bitcoin especially has been under a lot of scrutiny for its popular usage on the website Silk Road which was a marketplace for drugs, arms and other underground business. What many seem not to know is that bitcoins are not in fact anonymous; they can be tracked through the pseudonyms created by users to see every transaction ever made.

This budget announcement came soon after the Bank of England declared moves to undertake research into central bank issued digital currencies. Digital currencies have been pinpointed by the UK government as something with great potential but need a set of standards and best practices in order to decrease the volatility of prices in currencies such as bitcoins and to protect digital transactions that previously have not been particularly secure.

The UK’s move to embrace digital currencies shows that increased usage is expected in the future. The necessary regulation should allow consumers to feel more comfortable in becoming more reliant on digital transactions. Standardising digital currencies could help to adapt bitcoin and other virtual currency values for recording and transfers to help promote mainstream adoption.

It will be interesting to see whether other countries follow suit and devote more research into the support of digital currencies. However like with the CFPB’s proposed rules regarding prepaid payments, the standardising and regulation of digital currencies could mean a potential stifling in development and innovation within the industry that could limit longevity due to new innovations arising in the future.  

About the Author: Harry Kempe, a marketing intern at IIR USA, who works on various aspects of the industry including social media, marketing analysis and media. He is a recent graduate of Newcastle University who previously worked for EMAP Ltd. and WGSN as a marketing assistant on events such as the World Architecture Festival, World Retail Congress and Global Fashion Awards. He can be reached at hkempe@IIRUSA.com  

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