Move over Bitcoin, here comes Britcoin? – update

On 17 June 2021, Gherson Solicitors 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.

In more recent news, the Bank of England has now issued a statement on the next steps for a potential UK CBDC.

This blog now examines what this could mean for the regulation of cryptocurrencies (and, more broadly, cryptoassets) going forwards.

What was the Bank of England announcement?

On 9 November 2021, the Bank of England announced the next steps on the exploration of a UK CBDC. Crucially, no decision has been made on whether to introduce a CBDC in the UK. However, various task forces have been set up to explore the issue.

Further, it has been reported by Finextra that the UK Treasury Minister ,John Glen, has outlined a pathway to the creation of a UK CBDC with the option of a live launch in the second half of the decade.

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 Solicitors 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.

So, I’ve read that China just banned cryptocurrencies?

Yes this has been reported, and in fact China are also reportedly well on the way to developing their own digital currency.

Gherson have further explored other countries’ approaches to cryptocurrencies following this China ban. This concluded that ironically, China’s imposition of a crypto ban could mean that an outright ban in other countries is now looking less and less likely. Further, the wider introduction of CBDCs will probably not lead to further crypto bans.

What does this mean for crypto regulation?

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

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

This argued that as countries did 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 China has 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 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 advice, send us an e-mail, or alternatively, follow us on Twitter, Facebook, or LinkedIn to stay-up-to-date.

The information in these blogs 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 these blogs. For formal advice on the current law please don’t 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 2021

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