The regulation of Bitcoin in various regions of the UK is not strong enough, and the development of the Bitcoin industry has encountered bottlenecks

Golden Finance News - Cath Muligan, co-founder and engineer of the Cryptocurrency Research Center at Imperial College London, believes that the lack of a regulatory framework has held back Bitcoin startups in many ways.

There is no VAT when exchanging Bitcoin for UK currency. Image source: Golden Finance

India’s unrealistic regulatory framework

India’s unrealistic regulatory framework is an example of what Muligan is worried about. Indian startups, exchanges, and trading platforms self-regulate with strict AML/KYC policies due to the lack of clear regulation of Bitcoin trading in the country.

Although Indian regulators announced to the media that they would legalize Bitcoin in May 2017, Bitcoin exchanges and companies in the country have not been able to realize their true potential for many years. Due to the unclear government regulation of Bitcoin and cryptocurrencies, these companies have targeted general consumers as their users.

UK law does not require Bitcoin exchanges to implement AML and KYC systems Image source: Golden Finance

Mulligan said that in the UK, Bitcoin is treated as a private currency and faces the same problem in India. Startups need a clear regulatory framework for the development of Bitcoin and blockchain, but the country's regulators have not formulated such a regulatory framework.

"We've got a situation in the UK where a lot of startups are running after regulators and asking, 'How can we be regulated?' Bitcoin is actually considered a private currency in the UK. If you convert Bitcoin into UK fiat, there is no VAT, but you do have to pay a commission. From the UK's perspective, there is not much regulation on Bitcoin," said Mulligan.

Unlike China or the United States, which regulate Bitcoin exchanges and trading platforms, UK law does not require Bitcoin exchanges to implement AML and KYC systems. However, many exchanges still implement strict AML/KYC systems because they do not want to encounter what happened to China's OKcoin and Huobi.

As the Chinese government implements its AML and KYC regulations, Huobi and OKcoin were asked to suspend withdrawals until they meet the requirements of the new draft regulations.

“They haven’t been forced to have AML/KYC policies yet, but I think Japan will do that because they have a lot of startups because the business environment there is stable and the regulations are clear,” Mulligan said.

Will it soon enter the mainstream?

If Bitcoin is to enter the mainstream, the government must recognize it as a legal currency and implement practical regulatory policies for the development of this industry.

The Philippines and Japan have regulatory frameworks for Bitcoin, recognizing it as a legal currency and payment method. This clarifies the legality of Bitcoin, and the industry has developed rapidly in Japan and the Philippines.

Eita Jankelewitz, a lawyer at a law firm specializing in blockchain and cryptocurrency, said Bitcoin has not yet reached its full potential as a digital currency cash system and currency. Jankelewitz believes that for Bitcoin to become popular among the mainstream, an effective regulatory framework is needed.

Jankelewitz wrote: “The fact is that as a currency, Bitcoin has not taken off in the UK or around the world, and people are usually buying it because they think its price will rise in the long term, or simply because they like its volatility and decide to trade it like gold, but the demand for it is not the most urgent.”