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The major UK banks warned bitcoin could negatively impact the financial system and currency in a submission to the UK Treasury.
The leading banks of the UK have warned the Chancellor George Osborne that bitcoin poses certain threats to the financial system of the country and, in particular, facilitates terrorism and criminal activity.
Earlier, the Chancellor proposed to turn the UK into the financial centre for digital currencies, including bitcoin.
Last year, the UK Treasury announced: “The government will look at the potential virtual and digital currencies have for achieving positive change and for encouraging innovation in our world leading financial sector, as well as the potential risks.”
Treasury was tasked to carry out a research on digital currencies and analyze the potential advantages as well as risks of the cryptocurrency.
Osborne added that in order to support the needs of consumers and businesses all over the world, the UK has to be open to innovations in the financial sector.
The British Bankers’ Association (BBA), which includes such major banks as Barclays, the Royal Bank of Scotland and Lloyds, sent a document to the Treasury, warning that use of virtual currencies would negatively affect the UK economy. The banks addressed the anonymity of cryptocurrency, which enables carrying out criminal activities.
The BBA stated that banks “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.”
The banks also warned that digital currencies would have a negative influence on the national currency. “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 submission reads.
“In contrast to transactions made through the existing regulated payments system, the anonymity offered by digital currencies can facilitate transactions with the purpose of laundering money financing terrorism, or purchasing illegal goods and services,” the BBA states.
“Furthermore, users may unknowingly be committing criminal offences, such as money laundering or terrorist financing, through their interactions with digital currency.”
Speaking to The Sunday Telegraph, Anthony Browne, BBA chief executive, said: “The reality is that if terrorists and criminals harness these unregulated currencies they will be far harder for the law enforcement and intelligence agencies to hunt down.”
Digital currencies have a reputation of being used for illegitimate purposes, like buying drugs. In comparison with conventional money, cryptocurrency is not controlled by any authority. However, it is gaining popularity with a large number of businesses have already adopted it.