MPs launch inquiry into digital currencies

Written by David Adams
22/02/2018

The House of Commons Treasury Select Committee has launched an inquiry into digital currencies and distributed ledger technology. The inquiry will examine the role of digital currencies in the UK, possible opportunities and risks for consumers, business and government; and will consider the potential impact of distributed ledger technologies (ie.blockchain) on UK financial institutions and infrastructure. It will also seek to determine how the regulatory response to digital currencies can be balanced to provide adequate protection for consumers and business, without stifling innovation.

Alison McGovern MP, a Committee member, said: “It is time that Whitehall and Westminster understood cryptocurrency better and thought more clearly about the policy environment for blockchain technology.”

A spokesperson for cryptocurrency industry trade body CryptoUK said it welcomed the inquiry and that its members believe that the right regulatory framework could provide an opportunity for the UK "to become a global leader in this exciting technology".

"Our message to the Treasury Select Committee is that it is entirely possible to deliver a regulatory framework which ensures consumer protection and which enables crypto businesses to thrive," said the spokesperson.

The announcement of the inquiry comes in the week when Bank of England Governor Mark Carney has suggested that Bitcoin had “failed” as a currency, because its wildly fluctuating value means it cannot be used as a store of value and it is not used as a medium of exchange. Carney did note the potential value of distributed ledger technology as a way to verify financial transactions – and this week has also seen the launch of a distributed ledger trade finance solution pilot, by the banking initiative Marco Polo.

The other cryptocurrency stories catching the eye in recent days have all been related to the sometimes bizarre consequences of hackers hijacking computer resources to mine Bitcoin and other cryptocurrencies – a practice known as crypto-jacking. On Wednesday, Tesla admitted that its cloud computing platform had been hacked, possibly for this purpose. On Thursday it was revealed that the Los Angeles Times website has been exploited by hackers, who were using site visitors’ browsers and PCs to mine Bitcoin.

And last week, energy producers in Iceland expressed concern at the amount of energy being used to power cryptocurrency servers located on the island, suggesting that demand for these resources is increasing so fast that it may run out of capacity to meet overall demand for electricity in Iceland.

Cynics might suggest that the moment MPs start to discuss an over-hyped technology may herald the beginning of the end for that craze. But might it also be worth worrying about what happens if policymakers start to think they actually can effectively regulate what this correspondent humbly suggests is this century’s tulip craze? (It’s Bitcoin I’m being rude about here, not blockchain. Blockchain is great.)