British Banks Questioning Bitcoin - Essay Example

Major banks in the United Kingdom are asking questions about how bitcoin and other crypto currencies are monitored.

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It is not a new discovery that bitcoin poses some big risks to the consumers and also to the traditional financial system.

The United Kingdom’s biggest banks are questioning the Chancellor’s attempts to make the country a leading global center for digital currencies like bitcoin.

The British Bankers Association (BBA) has specifically warned that bitcoin and others pose serious risks to customers and the overall financial system. This warning was part of a submission to the Treasury’s consultation regarding the benefits and threats of crypto currencies.

The British Bankers Association represents all the major British banks including Lloyds, Barclays and the Royal Bank of Scotland.

It questioned the anonymity that is granted to the users by digital currencies. The potential threat of bitcoin being used for different criminal or terrorist activities was discussed too.

It was stated that it is essential for banks to check how legit transactions are, “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.”

In a combined submission with the Payments Council, the BBA also alerted about the potential instability that these relatively new currencies might trigger.

The submission read, “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 consultation was launched by Mr. Osborne in August of 2014. He explained that harnessing innovations in finance, the financial sector can meet users’ needs.

He said, “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.”

Chief executive of the association Anthony Browne, shared his view in an interview with The Sunday Telegraph.

According to him, if the criminals and terrorists use all these new and unregulated currencies, it will become much harder for the UK law enforcement and intelligence agencies to track them down.

In the meantime, lawyers warned that EU VAT rules, which were recently announced, could mean companies which accept payments in bitcoin could actually be accused of breaking the law.

From the beginning of this year, the online digital goods and services providers were expected to pay the sales tax in the region where the buyers are located.

The head of corporate tax at CMS, Richard Croker, said that companies which are accepting payments for any cross-border online services in bitcoin could be violating laws.

This is because the rules require these firms to know the where the customer is from and be able to show the location to the taxman. CMS is a city law firm.