‘It is time Whitehall and Westminster understood cryptocurrency better’, committee member declares following period of extreme fluctuations
The Treasury Committee is to launch an inquiry into digital currencies and distributed-ledger technology, with the aim of establishing whether policymakers can and should regulate the likes of bitcoin.
The inquiry will look at the role currently played by digital currencies, as well the main risks they could pose to consumers, businesses, and the public sector, with a particular focus on money-laundering, cybercrime, and volatility in financial markets. The committee will also scrutinise what impact blockchain and other forms of distributed ledgers could have on the Bank of England and the financial services sector.
The ultimate aim of the probe will be to establish how policymakers and regulators should best respond to digital currencies, and do so in a way that protects consumers and companies, but does not stifle innovation.
Bitcoin’s rollercoaster ride – tracking the currency’s value
22 February 2014 – £367 ↑
22 February 2015 – £151 ↓
22 February 2016 – £308 ↑
22 February 2017 – £911 ↑
22 June 2017 – £2,119 ↑
22 October 2017 – £4,507 ↑
12 November 2017 – £4,379 ↓
17 December 2017 – £14,592 ↑
6 February 2018 – £4,308 ↓
22 February 2018 – £7,566 ↑
Committee chair Nicky Morgan said: “People are becoming increasingly aware of cryptocurrencies such as bitcoin, but they may not be aware that they are currently unregulated in the UK, and that there is no protection for individual investors.”
First on the list of the key questions to be considered by the committee is whether or not digital currencies are “ultimately capable of replacing traditional means of payment”. They will also ask how much the technology could disrupt the economy and the delivery of public services, and examine how the government might need to adapt its processes in areas such as taxation and anti-money laundering activities.
“This inquiry comes at the right time, as regulators and governments wrestle with recent events in cryptocurrency markets”
Treasury Committee member Alison McGovern
The inquiry comes following a headline-grabbing period of wild fluctuation in the value of Bitcoin. A year ago, one unit of the cryptocurrency was worth under £1,000. Its value rose steadily for the rest of 2017, before exploding in the year’s last two months. Between 12 November and 17 December, the exchange rate for one bitcoin more than trebled, from £4,379 to £14,592.
But before the New Year, this had fallen back to less than £10,000, and the early weeks of 2018 brought an even more precipitous drop, as the cryptocurrency hit a low of £4,308 on 6 February. It has recovered somewhat since then and, at time of writing, one bitcoin is worth £7,566. But this is still little more than half of the value it held two months ago.
Alison McGovern, a member of the committee, said: “This inquiry comes at the right time, as regulators and governments wrestle with recent events in cryptocurrency markets. New technology offers the economy potential gains, but as recently demonstrated, it may also bring substantial risks. It is time that Whitehall and Westminster understood cryptocurrency better, and thought more clearly about the policy environment for blockchain technology.”
