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UK prepares for regulation on digital currencies

The growth of cryptocurrencies such as Bitcoin has been boosted by the news that the UK government has begun preparing for the regulation of the nascent industry, pledging £10m to be invested into research of its uses.


In Wednesday's Budget 2015, the UK Chancellor of the Exchequer George Osborne set out a series of measures to aid the growth of digital currencies and ensure this occurred in a securely regulated environment.


Osborne announced that the government would apply anti-money laundering regulation to digital currency exchanges in the UK in a bid to support innovation and prevent criminal use.


After a review of the responses received from a call for information issued in November last year, the Treasury noted that the distinctive features of digital currencies could be attractive to illegal users, prompting the decision to apply the anti-money laundering restrictions.


However, the government has not set out any defined plans for how it will regulate the sector.


It plans to launch a full consultation on the proposed regulatory approach early in the next parliamentary term - assuming it prevails in May's general election.


"The consultation will seek views and evidence on key questions including how anti-money laundering regulation should be applied to the digital currencies sector, the scope of the regulatory perimeter and the identity of the regulator," the report said.


It will also launch a new research initiative, bringing together research councils, the Alan Turing Institute and Digital Catapult with the industry to explore the opportunities and challenges it faces, backed by £10m in research funding.


The government will also work with the British Standards Institution and digital currency industry to develop voluntary standards for consumer protection.


"This will increase competitive intensity by supporting the growth of technology that can be adopted by banks and non-bank providers, allowing them to compete to offer new products and existing products delivered in cheaper or more efficient ways," Osborne explained.


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