The UK’s biggest banks have questioned the Chancellor’s attempts to make the UK a leading global centre for Bitcoin and other virtual currencies.
In a submission to the Treasury’s consultation on the benefits and threats of digital currencies, the BBA has warned that Bitcoin and others pose major risks to consumers and to the financial system.
The BBA, which represents the major British banks including Barclays, Lloyds and the Royal Bank of Scotland, has questioned the anonymity such currencies give to users, and the potential threat for them to be used for criminal or terrorist activities.
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.”
The BBA, in a combined submission with the Payments Council, 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.
Mr Osborne launched the consultation in August last year, saying: “It’s only by harnessing innovations in finance, alongside our existing world class knowledge and skills in financial services, that we’ll ensure Britain’s financial sector continues to meet the diverse needs of businesses and consumers, here and around the globe, and create the jobs and growth we all want to see in the future.”
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.”
Meanwhile, lawyers have warned that new EU VAT rules could mean companies that take payment in Bitcoin could be breaking the law.From the start of the year, providers of digital goods and services online have been required to pay sales tax in the country where the buyer is located.
Richard Croker, head of corporate tax at the City law firm CMS, said: “Companies accepting payment for cross-border online services in Bitcoin could be in violation because these rules require them to know and be able to show the taxman where their customers are.”