Is the bitcoin party over? UK to crack down on cryptocurrency amid crime concerns

Cryptocurrency exchanges in the European Union (EU) and UK are set to face increased regulation from next year, amid concerns they are being used for money laundering and tax evasion.

According to The Guardian, British government ministers are finalising plans to regulate digital money like bitcoin, a popular cryptocurrency built upon a technology known as the blockchain – a distributed network that operates without the need for traditional banks.

From next year, traders will reportedly have to disclose their identities to the government and platforms used to exchange the internet currencies will be forced to report any suspicious transactions they discover.

Authorities have warned that bitcoin – and its mounting rival currencies – are being used to facilitate crime, from the purchase of illegal drugs on dark web marketplaces to the financing of rogue terrorist cells.

Yet the value of bitcoin has spiked over the past year.

In late November it broke $10,000 per coin for the first time. Less than a year ago, the online currency was trading below $1,000 per coin.

UK and EU officials say the changes will bring exchanges in line with anti-money laundering and counter-terrorism laws. A concrete timescale for the legal tweaks has not been confirmed.

On Sunday (3 December), House of Commons Treasury select committee member and Labour MP John Mann told The Telegraph changes were needed to stay up-to-date with technology.

"These new forms of exchange are expanding rapidly and we've got to make sure we don't get left behind – that's particularly important in terms of money laundering, terrorism or pure theft," he explained. "It would be timely to have a proper look at what this means."

The Treasury's economic secretary, Stephen Barclay, teased the upcoming plans in a parliamentary response to Labour MP Chris Evans, published in early November.

Barclay wrote: "The UK government is currently negotiating amendments to the anti-money laundering directive that will bring virtual currency exchange platforms and custodian wallet providers into anti-money laundering and counter-terrorist financing regulation."

He continued: "[This] will result in these firms' activities being overseen by national competent authorities for these areas. The government supports the intention behind these amendments.

"We expect these negotiations to conclude at EU level in late 2017 or early 2018."

Despite worries about bitcoin, the UK government has spoken favourably about the blockchain, an online ledger technology which can act independently of cryptocurrencies.

Some traditional banking executives remain sceptical of bitcoin. In September this year, Jamie Dimon, the CEO of financial giant JPMorgan, controversially described it as a "fraud".