UK Positioning Itself As Bitcoin's Best Friend

from the while-the-us-goes-the-other-way dept

Imagine if a government put out a series of questions that the public could respond to, garnered responses from across a community, listened to them, and then actually enacted sensible tech policy. Sounds like a dream, right? Well that's exactly what the UK just did.

Last week the UK announced the results of its extensive inquiry on bitcoin and digital currencies, and so far, the results seem both fair and reasonable.

One major conclusion is that the UK will apply AML (anti money-laundering) regulation to digital currency exchanges, with the details to be determined by the Parliament in the forthcoming session. The US, by contrast, already imposes such requirements on exchanges plus other digital currency companies via FinCEN and the Bank Secrecy Act. The UK government will also work to ensure that law enforcement has the tools it needs to stamp out criminal uses of digital currencies.

But the even bigger part is what's missing: no licensing regime for digital currencies.[1] No arduous process for startups and small businesses. No policies that give an advantage to big institutions over up-and-coming innovators.

In fact, the British government decided that what is most appropriate is to work with the digital currency community to develop a set of best practices for consumer protection and create a voluntary, opt-in regime. This approach was chosen "in order to address the risks identified but without imposing a disproportionate regulatory burden on the industry." And because it recognizes the substantial promise that digital currency technology has to offer, the government will devote GBP 10 million (approximately US$15M) in an annual budget for research in the space, including the newly-formed Alan Turing Institute.

The report reads like a breath of fresh air, with an honest assessment of the current low likelihood of use by major criminal enterprise, and acknowledgements of the risk of regulating too much, too soon. It even summarizes the belief that New York's proposed BitLicense is an overly restrictive approach that could damage the industry.

The UK's approach differs from that of New York in several ways, including that the UK chose to analyze first and propose later. While NY did hold hearings in advance of releasing its regulations, it still to this date has failed to release a summary of its research and rationale for requiring strong digital currency regulation, despite its legal requirement to do so. And New York's regulations require permission to innovate via licensing, whereas the UK's proposal takes a different and far more innovation-friendly tack.

The UK digital currencies report acknowledged that market participants are addressing some of the risks in the space, and singled out exchanges as a special category, instead of New York's overly broad "virtual currency business activity" that encompasses everything from microtipping services to launching a protocol for a new currency. (As an aside, New York has claimed it won't regulate "software developers," but what it actually means is it won't regulate software developers as long as they aren't developing the software covered by its proposed law.)

Some London-based entrepreneurs I spoke to reacted with uncertainty about the effect that overly burdensome anti money-laundering regulations could have, and this is yet to be determined. But in the end, a regime in which one does not need permission to innovate, but instead has a reasonable set of rules to abide by, bodes far better for building the future of technology.

Basically, the UK just became the anti-NY. And the innovation will flock to the places with smart, sensible policies that allow for permissionless innovation.

[1] For companies that deal with consumer funds in GBP, Euro, or other "fiat" currencies, they'll likely still need to be registered with or authorized by the government.

Filed Under: bitcoin, innovation, new york, permissionless innovation, regulations, uk


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  • icon
    Ninja (profile), 24 Mar 2015 @ 6:44am

    Given how surveillance happy the UK govt seems to be I take this with some caution. We can only be sure the UK will adopt such stance in the long run. Now I'm just skeptical.

    Still, good to see that it is at least being discussed.

    reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 24 Mar 2015 @ 8:47am

    > Basically, the UK just became the anti-NY. And the innovation will flock to the places with smart, sensible policies that allow for permissionless innovation.

    ... and away from places where privacy rights are illusory? You realize this has the makings of a perpetual motion machine, don't you?

    reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 24 Mar 2015 @ 9:08am

    Is it April's first? No...
    What's happening? Am I going insane? From the UK of all places?

    reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 24 Mar 2015 @ 9:12am

    I wonder if they'll do the same for ZeroCash.

    reply to this | link to this | view in chronology ]

  • icon
    Mason Wheeler (profile), 24 Mar 2015 @ 9:54am

    with an honest assessment of the current low likelihood of use by major criminal enterprise

    Yeah, something like Silk Road is so incredibly unlikely that it already happened. Twice.

    reply to this | link to this | view in chronology ]

  • identicon
    John, 24 Mar 2015 @ 3:26pm

    Wont happen

    Once the big end of town get in the ear of the PM, the barriers will go up to keep bitcoin a niche player. Only the big players (banks etc) will be allowed to rollout a digital currency so that the public can be protected.

    reply to this | link to this | view in chronology ]

  • identicon
    Jake, 25 Mar 2015 @ 7:46am

    You know, in all fairness to the California state law cited as "[giving] an advantage to big institutions over up-and-coming innovators", the rules about providing valid ID and having a certain percentage of your capital invested in nice safe stable government bonds sound pretty reasonable to me. Peer pressure and the free market will do Sweet Fanny Adams for any member of the public who loses several thousand dollars because one of these companies went tits-up while it was in transit, you know?

    They could stand to knock a zero off the registration fee though.

    reply to this | link to this | view in chronology ]

  • identicon
    Socrates, 25 Mar 2015 @ 6:56pm

    Fake Investigations and unsafe citizens

    As PGP authtor Phil Zimmermann once said "If privacy is outlawed, only outlaws will have privacy."

    This is a fundamental truth.

    It is just as true for economic transactions as it is for mail and email.



    What is possibly even worse. Regulating crypto coins to prevent laundering is a complete scam:

    1) Does laundering predate crypto currencies? Yes. Laundering does not depend on crypto currencies. QED.
    2) Can property proper change hands during trade? Yes, such trade predates money! Laundering does not depend on crypto currencies. QED.
    3) Is laws only for "little-people". Yes, even mass-murder-crimes as the torching of Scandinavian Star does not prevent the policy from being payed out to unknown beneficiaries. The coker gasoline environmental crimes is allowed to continue in massive scale. Both large scale crime proper. The list is endless. None of the investigators dare to stop the flow of money. Laundering nor crime depend on crypto currencies. QED.

    At the same time secret trials give secret amounts of money to secret beneficiaries for secret reasons, directly from the nations pockets. As the result of secretly negotiated ISDS "treaties".


    When those responsible is behind bars we can consider new laws!

    reply to this | link to this | view in chronology ]

  • identicon
    Andy, 21 Apr 2017 @ 12:13am

    It`s a really good news to hear. However, in 2017 every country wants to cut down these cryptocurrencies (China closes the market for them, Russia wants to provide authentication for cryptocurrency etc) You cannot easily buy bitcoin western union unless you are in specific country or using VPN

    https://casherbox.com/en/

    reply to this | link to this | view in chronology ]


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