Parliament launches inquiry into bitcoin and other cryptocurrencies

The meteoric rise of cryptocurrency into public consciousness has piqued the interest of the Parliamentary Treasury Committee.

It has today announced it is launching an inquiry into digital currencies and distributed ledger technology.

The cross-party group of MPs says it intends to examine the role of digital currencies in the UK, including opportunities and risks to consumers, businesses, and government. It will also look at the potential effects of distributed ledger technology – the technology behind cryptocurrencies that is more commonly known as blockchain – on financial institutions and infrastructures.

The news follows the government confirming its intention, in December 2017, to regulate cryptocurrencies such as Bitcoin and Ethereum.

Alison McGovern MP, member of the Treasury Committee, comments: ‘This inquiry comes at the right time, as regulators and governments wrestle with recent events in cryptocurrency markets. New technology offers the economy potential gains, but as recently demonstrated, it may also bring substantial risks.

‘It is time that Whitehall and Westminster understood cryptocurrency better, and thought more clearly about the policy environment for blockchain technology.’

In addition, the inquiry will scrutinise the regulatory response to cryptocurrencies from the government, financial watchdog the Financial Conduct Authority (FCA) and the Bank of England. The Committee says it wants to look at ‘how regulation could be balanced to provide adequate protection for consumers and businesses without stifling innovation’.  

Chair of the Treasury Committee, Nicky Morgan MP, says: ‘People are becoming increasingly aware of cryptocurrencies such as Bitcoin, but they may not be aware that they are currently unregulated in the UK, and that there is no protection for individual investors.

‘The Treasury Committee will look at the potential risks that digital currencies could generate for consumers, businesses, and governments, including those relating to volatility, money laundering, and cyber-crime.’

Could cryptocurrencies replace traditional payment methods?

Despite the fury with which the value of Bitcoin rose last year and then collapsed in January, many still see the technology that underpins cryptocurrencies, so-called ‘distributed ledger technology’ as having immensely powerful potential applications for the internet and finance.

Morgan adds: ‘We will also examine the potential benefits of cryptocurrencies and the technology underpinning them, how they can create innovative opportunities, and to what extent they could disrupt the economy and replace traditional means of payment.

'The distributed ledger technology that supports digital currencies is said to have significant transformative potential, not least within the financial services sector.

'Striking the right balance between regulating digital currencies to provide adequate protection for consumers and businesses, whilst not stifling innovation, is crucial. As part of the inquiry, we will explore how this can be achieved.'

This article was originally written by our sister publication Moneywise.

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