UK to investigate Bitcoin role in the economy

George Osborne has announced that the government plans to investigate the role of digital currencies like Bitcoin in the economy.

UK chancellor George Osborne has announced that the government will explore the role that digital currencies such as Bitcoin play in the British economy, and especially in its financial system.

In a speech given in the capital’s Canary Wharf on 6 August, Mr Osborne said the Treasury will study the benefits and drawbacks of digital currency and consider whether or not they should be regulated.

At the moment Bitcoin is not controlled by a central bank, but it has been growing in popularity over the past few years in spite of a reputation for rapidly fluctuating exchange rates.

Increasing numbers of stores and eateries around the country have started accepting Bitcoin as a legitimate form of payment, largely in and around London.

It may not be a name on many people’s lips, but Bitcoin is already making an impact on the economy. The Telegraph reports that the government was planning to charge VAT on the creation of Bitcoin, though the plans were scrapped earlier this year. However, profits from trading the currency are still subject to capital gains tax and any goods or services that are exchanged for Bitcoin still have VAT added to them.

Mr Osborne was speaking at the launch of Innovate Finance, a new body set up with a focus on financial technology, or fintech.

It comes as part of a concerted effort on the part of the government to make the UK a future world leader in the fintech industry – indeed, chief government scientific advisor Sir Mark Walport has been charged with a review into the future of fintech to keep the UK at the forefront.

“I’m here today because I want the UK to lead the world in developing fintech. That’s my ambition – short and sweet,” he said.

CNET reports that the UK is likely to take a gentler approach to Bitcoin regulation than other nations like the US, where subpoenas were issued to some individuals and firms that were associated with cryptocurrencies. That would allow Britain to potentially attract business activity that might have gone elsewhere.