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UK eyes AML rules for bitcoin regulation

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The Treasury has been plotting its move since 2015 and could go ahead with regulations this year

The UK Treasury’s proposal in December to regulate bitcoin under anti-money laundering (AML) rules could have far reaching consequences for how it the currency is traded and on its value.

Concerns about the purposes of bitcoin trading has led both the UK and the EU to plan new legislation that would create new regulatory oversight. The EU plans to require investors to disclose their identities, and online platforms to carry out due diligence on customers and report any suspicious transactions. The UK government also wants the EU to amend the 2017 AML Directive so that it has the authority to oversee any activity from crypto exchanges.

Bitcoin has attracted widespread attention after its value increased tenfold in the past 12 months, but has also been heavily criticised as an uncertain investment. Blackrock chief executive Larry Fink said in October that bitcoin just shows ‘how much demand for money laundering there is in the world’ following remarks from his JP Morgan counterpart Jamie Dimon that the cryptocurrency was a fraud.

In May 2015 Ross Ulbricht was sentenced to life in prison for operating Silk Road, an anonymous online market for drugs. The site only accepted payment in Bitcoin as a way of ensuring buyers remained anonymous. After the site was shut down, another online drug marketplace, Agora, began which also only accepted payment in Bitcoin.

Difficulty in regulating bitcoin

Slaughter and May partner Ben Kingsley said that the very nature of bitcoin makes it difficult to regulate, but limited progress could be made if AML processes are implemented.

“Imposing AML disclosure requirements on bitcoin exchanges would shine a light on one corner of European crypto markets,” he said. “But of course by its nature bitcoin...