Cryptocurrency poses risks due to lack of proper regulation, BBA letter warns
Britain’s leading banks have warned the Treasury that cryptocurrencies such as Bitcoin could be being used to help fund terrorism.
The British Bankers Association (BBA), which represents organisations including Barclays, Lloyds and Royal Bank of Scotland, has written to the Chancellor warning that his push to make Britain a haven for virtual currencies could be putting the country at risk.
The group is concerned about the anonymity that such peer-to-peer currencies give to users, and the potential threat for them to be used for criminal or terrorist activities.
The letter says that banks “need to be able to demonstrate that transactions are legitimate and that they are not supporting criminal or terrorist activity. At present … [banks] are unclear on their responsibilities with regards to servicing those working with, paying or receiving digital currencies.”
Anthony Browne, chief executive of the BBA, told The Sunday Telegraph: “The reality is that if terrorists and criminals harness these unregulated currencies they will be far harder for the law enforcement and intelligence agencies to hunt down.”
The BBA also warns of the potential instability such new currencies might cause.
“If ‘convertible’ currencies were to reach mass adoption in the UK, there is a possibility that this may have an increasing effect on sterling. The Bank of England has noted that it is monitoring this,” the submission continues.
The statement will prove embarrassing to Chancellor George Osborne, who last year announced plans to explore how cryptocurrencies such as Bitcoin can play a role in the UK financial system, saying that he wanted to make the UK the “global centre of financial innovation”.
This was despite a report from the Bank of England last September which warned that the digital currency Bitcoin could pose a threat to financial stability in the UK should it see widespread adoption.
“Digital currencies represent both innovations in payment systems and a new form of currency,” the bank said in its report.
Bitcoin has lost some of its lustre in recent months, thanks to a range of scandals surrounding the currency. Last week, it plunged to its lowest value in years, falling to as low as $173, a far cry from its high point of over $1,100 back in December 2013.
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