The main reservation governments have against Bitcoin is that it is anonymous. In the eyes of many users, Bitcoin's anonymity is a very useful characteristic. However, governments are responsible for ensuring that their citizens are safe from any and all forms of harm.
With the above explanation in mind, Bitcoin is dangerous in the eyes of the governments as it cannot be regulated and anyone can buy bitcoin without having to disclose their identity. As such, criminals and other offenders can simply launder their ill-gotten gains through bitcoin.
If one might further extend their imagination, tomorrow a hitman may ask for payment in the form of bitcoin as he would consider it a safer alternative to fiat money, which can easily be traced back to him.
The UK treasury wants to take action against such dangerous institutions and are looking to regulate the cryptocurrency industry. This would require anyone purchasing or selling cryptocurrencies to be identified. Moreover, the cryptocurrency investors would be liable to report any suspicious activity.
A spokesperson for the UK treasury had the following comments regarding the latest development:
“We have clear tax rules for people who use cryptocurrencies, and like all tax rules, these are kept under review. We also intend to update regulation to bring virtual currency exchange platforms into anti-money laundering and counter-terrorist financing regulation.”
These new regulations may make the process of buying and owning bitcoin less anonymous for the ordinary UK citizen. However, all is not gloomy, as such a regulation may eventually lead to a greater acceptance of cryptocurrency in governments and other federal institutions.
For the criminals, for whom such regulations are being prepared, this will have little to no effect. It might cause a little headache, but they can simply move their cryptocurrencies from one exchange to another where the regulations may not apply.
With the passing of such a regulation, the cryptocurrency exchanges will be liable to keeping track of those buys coins from them They will have to report suspicious activities to the government, through proper channels.