UK set to crack down on Bitcoin


Just like their Asian counterparts were, UK exchanges are in for a torrid time. This is because the English government is set to start cracking down on exchanges. Bank of England Governor, Mark Carney, hinted this on Friday in a scathing censure of Bitcoin and other cryptocurrencies.

Carney believes cryptocurrencies have become "inherently risky" and cannot fulfill their purpose as basic money. The governor said he foresees a "pretty brutal reckoning" for Bitcoin and virtual coins as they have "the hallmarks of a bubble."

He made his position known in a stinging speech and an interview with Sky News on Friday. According to him, cryptos are used for bad deeds and don't have a solid future. 

"Bad, futureless money"

Mark Carney stated that cryptocurrencies don't have a definite long-term future and are a "poor store of value". 

"The most fundamental reason to be sceptical about the longer term value of cryptocurrencies is that it is not clear the extent to which they will ever become effective media of exchange," he said.

"Currently, no major high street or online retailer accepts Bitcoin as payment in the UK, and only a handful of the top 500 US online retailers do. For those who can find someone willing to accept payment for goods and services in cryptocurrencies, the speed and cost of the transaction varies but it is generally slower and more expensive than payments in sterling."

He also argued that governments are right to be concerned about their "inefficiency and anonymity, one of the main reasons for their use is to shield illicit activities."

"This cannot be condoned", he said. 

Exchanges to be axed

Carney also expressed fears that the proliferation of cryptocurrencies and the flow of institutional money into Bitcoin and other digital currency markets will spell doom for financial institutions and lead to their downfall. 

"Looking ahead, financial stability risks could rise if retail participation significantly increases or linkages with the formal financial sector grew without material improvements in market integrity, anti-money laundering standards and cyber defences". 

"There is unease that the combination of these vulnerabilities and widening retail participation could damage the reputations of those financial intermediaries connected to crypto-asset markets. In extreme circumstances, it could even undermine confidence in the broader financial system itself, particularly if people held an unfounded belief that authorities had legitimised these activities".

And so, some form of regulation is expected to hit exchanges in the country soon.

Details are scanty at the moment but the bank is set to present a paper about cryptocurrencies to the G20 by the end of the month. Carney also hinted that the bank has tested crypto technologies for payment systems in the UK. So it's possible the bank may launch its own coin. 

What's the impact on Bitcoin?

So far, there has been no visible impact of this development on the market. Bitcoin continued trading in a band of 10,000 to 11,000 USD. 

The UK will be joining China, India, and other countries to have cracked down on exchanges if it makes good its threat. However, this doesn't stop the peer-to-peer trade of crypto coins nor does it stop people from joining exchanges in other countries whose governments aren't anti-Bitcoin. 

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