The UK government announced a US$14.6 million research fund to look into opportunities in digital currencies.
Publishing the results of the five month consultation on the future of digital currencies, the government outlined a series of recommendations and the next few steps on their approach to the emerging sector.
“The government is launching a new research initiative which will bring together the Research Councils, Alan Turing Institute and Digital Catapult with industry in order to address the research opportunities and challenges for digital currency technology, and will increase research funding in this area by £10 million to support this.”
As well as having received the US$14.6 million (UK£10 million) research funding pledge however, the report also raises the prospect of rigorous anti-money laundering controls for digital currency exchanges.
“The government intends to apply anti-money laundering regulation to digital currency exchanges in the UK, to support innovation and prevent criminal use. The government will formally consult on the proposed regulatory approach early in the next Parliament”
The government's public call for opinions last November was answered by a wide range of over 120 enthusiasts, start-ups, security experts, academics, and established financial institutions. Publishing a wide range of opinions from this group, the report comes across as rounded and well-informed.
The announcement coincides with the UK's spring budget in which the Chancellor of the Exchequer George Osborne promised that: “we [will] take steps to promote competition, back fintech [Financial Technologies], and encourage new business like global re-insurance.” The UK’s government has solidified their plans for digital currencies.
Both the Chancellor and the Bank of England have shown an increased interest and enthusiasm for digital currencies over the last two months, with the Bank issuing a favorable report, and Osborne tweeting his backing.
“Don’t rush to legislate – Understand the specific nuances of decentralized payment systems and work with companies to overcome the current security challenges. In time, we’ll have a better understanding of which regulations are required and which will work. And most importantly, give the technology time to create industry solutions.
The UK is in an almost unique position to benefit. London in particular is ideal for Bitcoin start-ups, with creative and technical skills sitting side by side with elite financial services expertise.
At LazyCoins we anticipated new legislation will be brought forward at some stage in the UK, so we have stayed a step ahead by already obtaining a Money Services Business License, and following a strict AML/KYC[Anti-Money Laundering/Know Your Customer] verification process.”
Over at another London crypto start-up, Elliptic analyst Nathan Jessop has been examining the news from the Treasury. We asked him for his reaction to the report.
“The Treasury Response represents very encouraging progress in several key areas: Anti-Money Laundering, consumer protection, and technical standardization.
Prioritizing AML will bring much-needed legitimacy and clarity to the industry, and hopefully encourage banks to engage more with digital currency businesses. Furthermore, allowing the industry to develop its own consumer protection and technical standards will promote collaboration and innovation much more efficiently than top-down regulation.
Elliptic is fully aligned behind these initiatives. In fact, we have been actively developing compliance tools to directly address the Treasury's AML concerns. As founding members of the UKDCA, we look forward to working with the industry to promote consumer protection and technical standards.”
The report calls for any regulations on the sector to be discussed in the next parliament alongside a formal consultation. With a general election in May, work could begin on this soon after a new government is formed.
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