On February 22, 2018, the UK's Treasury Committee revealed that it would conduct an inquiry to better understand the role of cryptocurrencies in business, and the present risks they may pose to the marketplace.
The inquiry will also assess how cryptocurrencies and blockchain technology may impact governments, general financial infrastructure, and financial houses such as the central bank. Specifically, the Treasury Committee said it will "scrutinise the regulatory response to digital currencies from the Government, the Financial Conduct Authority, and the Bank of England," as it seeks "protection for consumers and businesses without stifling innovation."
Questions that the inquiry will be focused on include:
"Are digital currencies ultimately capable of replacing traditional means of payment?
To what extent could digital currencies disrupt the economy and the workings of the public sector?
What risks and benefits could digital currencies generate for consumers, businesses and governments?
How is distributed ledger technology being applied in the financial services sector, and how might it be applied in future?
What work has the Government (and its associated bodies) done to understand, prepare for and, where relevant, encourage changes that may be brought about by increased adoption of digital currencies?
How might the Government's processes adapt should digital currencies be adopted more widely (e.g. tax implications, anti-money laundering measures)?
Is the government striking the right balance between regulating digital currencies to provide adequate protection for consumers and businesses whilst not stifling innovation?
Could regulation benefit digital currency start-ups by improving consumer trust?
How are governments and regulators in other countries approaching digital currencies and what lessons can the UK learn from overseas?"
As it seeks to find answers, the Treasury Committee is accepting submissions from the public.
Member of Parliament (MP) and chair of the Treasury Committee Nicky Morgan issued a statement about the inquiry:
"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."
However, Morgan wasn't all doom and gloom on regulation, and pivoted to speak of the merits behind cryptocurrencies and the blockchain technology backing them: "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."
Fellow MP and the Treasury Committee member Alison McGovern said that the timing is right for the inquiry, since both regulators and governments are working to weigh the "potential gains" and "substantial risks" brought on by the new technology. She said, "It is time that Whitehall and Westminster understood cryptocurrency better, and thought more clearly about the policy environment for blockchain technology."
Morgan acknowledged that there is a "transformative potential" in blockchain technology to go beyond the financial sector and said, "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."
Other European authorities are also exploring how to regulate cryptocurrencies. European Commission Vice President Valdis Dombrovskis said on February 23 that experts will hold talks about the prospects of introducing regulation in the following week.