Japan introduced legislation to protect users from being ever stung by a collapse again, while also making Bitcoin exchanges comply with anti-money laundering regulations and officially authorising it as a normal payment method.
In the UK, cryptocurrencies, as payment methods such as Bitcoin are known, still have a confusing legal status. But Japan’s move could act as a framework and catalyst for widespread adoption.
Dr Cathy Mulligan, co-director of Imperial College London’s Centre for Cryptocurrency Research and Engineering, who believes that insufficient regulation could be holding back startups and the growth of financial technology, rather than creating opportunities through lack of regulatory constraints, says: “We have the situation in the UK where many startups are chasing the regulator to say, ‘How are we going to be regulated?’ rather than the other way round.
“Bitcoin in the UK is really treated as private money. If you tried to exchange Bitcoin for sterling you don’t get charged VAT on the value of the Bitcoin but it is charged on, for example, the commission instead.
“From the UK perspective, we haven’t seen huge amounts of regulation. They aren’t being forced to have AML [anti-money laundering regulations] or ‘know your customer’ regulation just yet. I think what will happen in Japan is, there will be an influx in startups, because the business environment is stable and you’ll know how you’re going to regulate it.”
Despite the breakthrough in Japan, Bitcoin still faces challenges elsewhere. Last month, the US Securities and Exchange Commission rejected a proposal by the Winklevoss twins, Cameron and Tyler, to create an exchange-traded fund based on Bitcoin. There is a disagreement within the community over the cryptocurrency’s future, and continuing problems with security and theft.
However, Bob Swarup, author of Money Mania and a principal at Camdor Global Advisors, says: “You have a lot of people at the Bank of England and other policymakers talking about whether currency should become all-digital anyway, so a digital pound would immediately have competition online from Bitcoin or other digital currencies as well. “If a government in general doesn’t stay ahead of the curve, they might find themselves swamped by it. Japan [has] in effect created a framework for every digital currency out there.”
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