As an annual event famous for leading to big announcements, Davos has lived up to its promise so far in 2018, with an early announcement from the prime minister, Theresa May, that the UK intends to regulate cryptocurrencies.
Citing the risks posed by criminals using the famously anonymous cryptocurrency Bitcoin, the prime minister and the chancellor of the exchequer, Philip Hammond, announced their intention to bring in unspecified new rules before the crypto market becomes structurally important to the UK’s financial markets.
The UK is the latest in a string of national governments and leading banks to discuss regulation of the cryptocurrency markets, which function without a central regulatory body and allow anonymous payments. Sweden’s biggest bank has banned employees from trading in Bitcoin in order to avoid accidental involvement in criminal proceeds and South Korea announced that it would outlaw the anonymous trading of Bitcoin to help tackle crime.
The meteoric rise of Bitcoin and cryptocurrencies in general has been checked by hints at regulation, and fears over their security have caused the cryptos to endure a volatile start to the new year. However, not all experts think that regulation is bad news; while regulation may bring short-term damage to the cryptos’ value, in the long run, regulation means acceptance of the commodity’s value by national governments, also serving to calm the security fears that have long plagued the cryptos.
Kevin Murcko, CEO of cryptocurrency exchange CoinMetro, said: “As different nations move to regulate cryptocurrencies in different ways, the short-term impact on the markets will be outweighed by the longer-term stability afforded by consumer protections and the elimination of fraudulent entities and practices. Compliance with an established regulatory framework, if done right, could lead to wider mainstream adoption of cryptocurrencies and greater stability in emerging markets.”
The prime minister made no specific commitments or recommendations over what for the regulation would take, but it is expected the rules will be brought in before Bitcoin takes a large share of world trade, to avoid a disastrous crash if the bubble should burst.