http://www.telegraph.co.uk/news/2017/12/03/bitcoin-crackdown-amid-fears-money-laundering-tax-dodging/Ministers are launching a crackdown on the virtual currency Bitcoin amid growing concern it is being used to launder money and dodge tax.
The Treasury has disclosed plans to regulate the Bitcoin that will force traders in so-called crypto-currencies 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, which has a total value of £145 billion, 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.
John Mann, a member of the Treasury select committee, said he expected to hold an inquiry into the need for better regulation of Bitcoin and other alternative currencies in the new year.
He 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."
The changes come amid increasing fears that Bitcoin is being used by gangs to launder the proceeds of crime while also attracting currency speculators - with the value of the coin soaring in the past 12 months.
The value of a single Bitcoin unit has increased 12-fold this year from about £720 in January to currently trade at £8,700. Last week the currency rose by 13 per cent in just 12 hours.
The number of bitcoin users is estimated at about three million worldwide, according to a Cambridge University study done earlier this year. It is unclear how many of them are in the UK.
The new regulations are expected to be included in amendments to current European Union wide legislation designed to prevent money laundering and terrorism financing.
The changes 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 Bitcoin users will no longer remain anonymous.
Stephen Barclay, the Economic Secretary to the Treasury, revealed plans to change the legislation in a written parliamentary answer.
Mr Barclay said: “The UK government is currently negotiating amendments [to the anti-money-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 said last night: “We intend to update regulation to bring virtual currency exchange platforms into Anti-Money Laundering and Counter-Terrorist Financing regulation.”
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, 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 Bitcoins and other virtual currencies. The FCA described financial spread bets’ on the value of crypto-currencies 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” and described its pricing as “very volatile.”
Chris Evans, a Labour MP who has campaigned for greater 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.”
He welcomed the treasury’s decision to support the change to EU amendment but said the bitcoin and others served a useful purpose. Supporters of digital currencies insist that the likes of bitcoin are entirely legitimate and useful means to buy and sell goods without resorting to national currencies that are subject to exchange rate fluctuations.
Dr Constantino Grasso, a business management and law lecturer specialising in money laundering, said that the bitcoin economy was “already huge” and said regulation was needed but would not dampen the growth in digital currency. He said that “anonymity was appealing to criminals” but that gangs played only a small part in driving the bitcoin growth.
Dr Grasso has estimated that about 15 per cent of exchange platforms are based in the UK, suggesting the British market is one of the strongest in the world.
Over the weekend it emerged that two twin brothers had become the world's first Bitcoin billionaires. Tyler and Cameron Winklevoss, who once sued Mark Zuckerberg claiming he stole their idea for Facebook, made the money after making an £8m bet on the currency four years ago.
