The UK government should regulate activity in the cryptocurrency space, ideally working with regulators across the world to create global legislation, according to Silicon Valley Bank.
The US-based commercial bank, which boasts several offices worldwide, made these comments in its submission to the UK Treasury’s call for information on digital currencies last November.
According to the four page submission, obtained by CoinDesk via a freedom of information request, regulation could help mitigate the risks associated with digital currencies and provide a framework for companies in the space to operate. If this were to happen, cryptocurrencies would become more appealing to users.
The document reflected on the challenges of establishing global regulation, noting the need for the UK to pave the way in the short-term:
“If this [digital currency] is to be regulated, then yes, the [UK] government should lead and ensure accountability, sustainability, credibility and liquidity of digital currency participants or designate an appropriate body to the same.”
“Taking no action could leave the UK static to global economy change – if others go forward,” adds the document.
Describing digital currencies as a “another means of transferring value”, the document goes on to say that leveraging an existing payments regulatory framework would suffice, be more cost efficient and have less of an impact on innovation than creating new regulation.
“The FCA [Financial Conduct Authority] is a regulator in this context for the UK specifically and would likely prove some deterrent for those looking to exploit the industry for money laundering purposes, provide consistency with other payment methods and have an existing framework to be leveraged.”
Greater understanding
The document says the government needs to gain a better understanding of digital currencies before it establishes a set of specific guidelines for crypto firms and their banking partners. Once it has gained this understanding, it should make sure any regulations that are created are abided by.
“Activities outside of regulated firms should be prevented or restricted,” adds the document, “a clearer framework for banks to help support these companies with banking services would enable them to operate from the UK more easily and provide more certainty for banks to avoid taking on unnecessary risk, should the regulatory view of these companies change.”
Any new regulatory framework, the document says, should be specific, easy to understand and enforce know your customer guidelines so as to prevent fraud in the cryptocurrency space.
Other submissions
Silicon Valley Bank’s submission is the latest in a string of responses to the Treasury’s call for information, including responses from MasterCard, Accenture and Citi.
Similar to Silicon Valley Bank, multinational management consulting group Accenture called for regulation, suggesting the government apply identification requirements to bitcoin wallets, in the same way it does to bank account holders.
MasterCard’s submission stated that the risks posed by digital currencies were greater than the benefits, attacking claims of low transaction fees, faster processing time and system security.
In contrast, Citi was of the opinion that, in order to truly understand digital currencies and their benefits, the government should issue its own cryptocurrency.
Silicon Valley Bank’s submission can be viewed in full below:
Silicon Valley Bank's Response to ‘Digital Currencies: Call for Information’
Check out our in-depth bitcoin regulation report for more on this topic.
Silicon Valley image via Shutterstock.