DEAR STEEMINS, UK GOVT TO APPLY STRICT RULES ON CRYPTOCURRUNCIES LIKE (BITCOIN)

UK Government to Implement Tighter Bitcoin Regulations to Prevent Money Laundering

The UK government and the treasury will implement stricter Bitcoin regulations and Anti-Money Laundering (AML) policies to prevent financing of terrorism through the cryptocurrency.

A spokesperson for the UK treasury stated:

"We have clear tax rules for people who use cryptocurrencies, and like all tax rules, these are kept under review. We also intend to update regulation to bring virtual currency exchange platforms into anti-money laundering and counter-terrorist financing regulation."

Currently, the European market accounts for less than eight percent of total global Bitcoin trades. Given that the UK Bitcoin exchange market only accounts for a small fraction of the European market’s daily trading volume, the impact the UK government on the global Bitcoin market is minimal.

The market valuation of Bitcoin has recently surpassed the total amount of British pound in circulation, as well as its market cap. Hence, it is evident that the global Bitcoin market is not in need of the authorization or approval from the UK government. To put it simply, the UK government cannot crackdown on a currency that is larger and more valuable than its own currency, the British pound.

More to that, excessive regulation on Bitcoin will force investors and businesses out of the regulated British Bitcoin market to unregulated over-the-counter (OTC) markets, which will negatively affect the UK government in the long run. The movement of funds from a regulated to unregulated market will make it more challenging for the UK government to oversee Bitcoin transactions.

The most viable and practical method of regulating Bitcoin is to implement stricter Know Your Customer (KYC) and AML policies on existing cryptocurrency exchanges. Like Japan, the UK government could also explore the possibility of introducing a national cryptocurrency exchange licensing program to offer legal status to exchanges.

If the UK government does not follow the roadmap of other leading economies like the US, Japan, and South Korea in Bitcoin regulation by enforcing strict KYC and AML policies, then the government’s priority is not to crackdown on terrorism financing using Bitcoin, as advertised.

Although the UK has been recognized as the fintech hub of Europe, the majority of fintech companies have moved out of the UK amid doubts over Brexit. In contrast to other regions in Europe such as Germany, the UK has stricter regulations and impractical policies for fintech service providers.

Consequently, there exists no major cryptocurrency service providers or exchanges within the UK Bitcoin market. Many of the leading cryptocurrency trading platforms operating in Europe such as Kraken are based in other regions such as the US. For instance, Kraken, which processes the majority of trading volumes in Europe, is based in Berlin, Germany, San Francisco, US, and Tokyo, Japan.

Already, the UK blockchain and Bitcoin industries are struggling from a lack of developers, talents, and businesses. Excessive regulations will only restrict the local market, harming the long-term future of the UK’s cryptocurrency sector.

Bitcoin Adoption in the Luxury Market is Growing at a Rapid Pace

According to Dr. Garrick Hileman, an economic historian at the University of Cambridge and the London School of Economics, the popularity of Bitcoin in the luxury market as a payment method is increasing at a rapid rate, due to the inefficiencies and high fees of traditional banking systems.

The vast majority of items in the luxury market that include paintings, antiques, and rare collections are priced at tens of thousands of dollars in minimum. Last week, the art industry observed the $450 million sale of an original Da Vinci painting and most of the works presented by Christie’s were priced in the range of $1 million to $100 million.

Traditional banking systems and financial networks charge transaction fees based on the amount of the transaction. For instance, a wire payment of over $100,000 could cost the sender nearly $4,000 in transaction fees, which is impractical and inefficient, especially if the sender settles a large number of payments on a regular basis.

In contrast, Bitcoin transaction fees are dependent on the size of the transactions, not the amount. Hence, a transaction which costs over a million dollars can be settled with a $1 to $2 fee, which is substantially smaller than a bank settlement fee that could rise up to the tens of thousands of dollars.

Hileman said in an interview with CNN:

"Many economists dismissed it as a flawed form of money, something that could never achieve the level of adoption that it has. Today we estimate 5 to 10 million unique active users of Cryptocurrencies, and in my opinion that's nothing short of a minor economic miracle. If you're only paying a $2 transaction fee on a piece of art that's worth tens of thousands, the fee is basically zero. But if you're paying 2 or 3% on a piece of art of that value, then the numbers can go up quite a bit.”

The adoption of Bitcoin as a payment method has also been evident in the real estate market in the UK and the US, with several large-scale realtors and real estate companies only willing to accept Bitcoin as the sole payment method.

In September, a realtor in Dubai announced the sale of an apartment complex worth over $220 million in Bitcoin, given its low fees and its ability to eliminate intermediaries from the process of settling large payments.

Businessman Doug Barrowman stated:

"I’ve been invested in Cryptocurrency for some time, it's not a new thing.We’re offering the opportunity for people who’ve made significant gains to invest it in land. The Dubai development is the pinnacle of design, architecture and commerciality. That said, I didn’t feel this was enough. I wanted to offer the property, tech and blockchain community a unique and exclusive opportunity by merging the property and tech sectors together in a true first for the industry."