Cryptocurrencies are the talk of the world, some say they will evolutionise the world we live in whereas others say they are a fad. The answer to this question is one the writer cannot possibly provide. One question that can be answered is - "are cryptocurrencies legal?"
Are they legal all over the world?
In short, the answer is no. Bolivia, Kyrgyzstan and Ecuador have banned the use of cryptocurrencies totally.
Russia are considering a bill to fully regulate the use of cryptocurrencies. China have prohibited banks and financial institutions from dealing with cryptocurrencies. South Korea have recently banned all anonymous traders from dealing in cryptocurrencies.
Are they legal in the UK?
Yes - The Financial Conduct Authority has a pro-cryptocurrency stance and wants the regulatory framework to be supportive of the cryptocurrency.
The UK Government is acutely aware of the potential legal issues can flow from the use of cryptocurrencies. It is likely that UK laws will need to be updated to reflect the use of cryptocurrencies in the UK as they grow and become increasingly popular.
What are the main legal issues?
Cryptocurrencies can facilitate money laundering and tax evasion due to the traders of the commodity being able to remain totally anonymous.
The anonymity of cryptocurrency trading means that is very difficult for people using the commodity for criminal activity to be traced by anyone if suspicious activity is detected. The benefit of anonymity was made abundantly clear in May 2017 when a third of NHS Trusts were hit with ransomware with the offenders demanding payment in Bitcoin.
Cryptocurrencies have also been used for "dark-market sites" where criminals can buy and sell illegal items. This has allowed for criminal businesses to advertise their items online and sell these to the world with little chance of being tracked down.
A further issue arises from fraudulent traders and thieves who simply claim to trade cryptocurrencies but in actual fact simply defraud the unwitting cryptocurrency purchaser by taking their money with no valid cryptocurrency being exchanged.
What will the UK Government do to combat the legal issues?
The Treasury plans to regulate cryptocurrencies to bring them in line with anti-money laundering and counter-terrorism financial legislation. All traders will be required to disclose their identity and cryptocurrency platforms will need to carry out due-diligence on their customers. These regulations are expected in early 2018.
It is likely that far wider and complexed legislative updates will be required in order to keep up with the ever-expanding and developing world of cryptocurrencies.
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*This article is provided for general information purposes only and does not constitute legal advice or other professional advice.