Move over Bitcoin, here comes Britcoin? – Part 3

Back on 17 June 2021, Gherson Solicitor LLP’s criminal litigation, investigations and regulatory team wrote a blog entitled Move over Bitcoin, here comes Britcoin?. 

This blog noted how Britcoin was the name affectionately given to any potential UK Central Bank Digital Currency (“CBDC”) and explored such issues as “What is Britcoin”, “Is there a Britcoin” and “How would Britcoin differ to Bitcoin?”. 

The blog noted how the Bank of England Governor Andrew Bailey had recently expressed encouragement at the development of a UK CBDC, whilst also later acknowledged some of the potential risks. 

A subsequent blog entitled “Move over Bitcoin, here come Britcoin – Part 2” discussed a 9 November 2021 Bank of England announcement on the next steps on the exploration of a UK CBDC.  The blog concluded that crucially, no decision has been made on whether to introduce a CBDC in the UK.  However, various taskforces had been set up to explore the issue. 

Update – towards a UK CBDC?

Much has since progressed and it now seems more likely than not that the UK will be introducing a CBDC. 

For the Bank of England, it is reported, has now begun to build a CBDC team and has opened recruitment for staff to oversee the development of a proposed CBDC project. 

It is also reported how in February 2023, the Bank of England deputy Governor Jon Cuncliffe informed a committee of MPs that a digital pound has a better than 50/50 chance of coming to fruition.

Remind me, what is the difference between a CBDC and a cryptocurrency?

This is a very popular question and is, in fact, an issue that Gherson have extensively explored in a previous blog entitled What is a Central Bank Digital Currency.

More generally, it is interesting to observe that various countries are taking different positions with regards to their approach towards both CBDCs and cryptocurrencies.

What does this mean for crypto regulation?

In summary, it still looks more and more inevitable that this sector will be facing increased regulation. 

Gherson Solicitors have previously written a blog titled Does the introduction of CBDCs mean more crypto regulation?

In various subsequent blogs, including What is the current state of crypto regulation in the UK and What changes can we expect to UK crypto regulation, Gherson Solicitor LPP’s criminal litigation, investigations and regulatory team outlined the current state of UK crypto regulation.

Gherson’s criminal litigation, regulatory and investigations team have also previously written a blog entitled Non-fungible token (NFT) Regulation in the UK and a blog entitled Stablecoin regulation in the UK. 

Most recently, the team discussed UK crypto regulation – what changes does the recent HM Treasury Consultation Paper suggest lie ahead for UK crypto regulation.

In essence, as countries introduce Government-created CBDCs, there could be tensions emerging between a Government-created CBDC and the current crop of cryptocurrencies. A CBDC could be designed to bring many of the benefits of a Digital Currency, e.g. no cash, reduced anonymity, real-time tax collection and improved transaction monitoring, AML and KYC benefits, less potential for fraud and financial crime, more consumer protections and easier regulation.  However, this would be without the potential downsides of cryptocurrencies, e.g. anonymity, no control over issuance, more difficult regulation and more potential for financial crime.

Of course, there may also be those who see the very existence of cryptocurrencies as a threat to the introduction of a CBDC, and some would argue that this is why countries such as China have banned cryptocurrencies.

All-in-all, this is certainly an area subject to increasing attention from both regulators and prosecuting authorities. This is only likely to increase going forward.  Specifically, as countries expand development of (and eventually implement) CBDCs, there will be further fundamental changes to the financial regulation and compliance landscape, including in relation to cryptocurrencies.

It is, therefore, imperative that any organisation or individual that is involved in any way in this area has one eye on the future, and, equally importantly, is in a position to respond to upcoming changes.

How Gherson can assist

Gherson’s white-collar crime and regulatory team are able to provide advice and assistance with AML, regulatory and sanctions compliance, including in situations involving cryptoassets. 

Additionally, the team has recently started a series on the regulation of crypto, with the aim of advising those who work in the compliance of this sector.  In addition, for those who would like advice on relevant issues, including those who have had issues with the FCA registration process, our specialist regulatory and compliance team can guide individuals and companies through the process.

Please do not hesitate to contact us for further advice, send us an e-mail, or, alternatively, follow us on Twitter, Facebook, Instagram, or LinkedIn to stay-up-to-date.

The information in this blog is for general information purposes only and does not purport to be comprehensive or to provide legal advice. Whilst every effort is made to ensure the information and law is current as of the date of publication it should be stressed that, due to the passage of time, this does not necessarily reflect the present legal position. Gherson accepts no responsibility for loss which may arise from accessing or reliance on information contained in this blog. For formal advice on the current law please do not hesitate to contact Gherson. Legal advice is only provided pursuant to a written agreement, identified as such, and signed by the client and by or on behalf of Gherson.

©Gherson 2023

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