The Treasury is reviewing the role alternative currencies can play in the UK’s economy, the risks they might pose and whether they need to be regulated.
In a speech at the launch of the new financial technology trade body Innovate Finance this morning, Chancellor George Osborne said the emergence of these currencies is an example of the “world of finance as we know it changing before our eyes”.
He said: “Recognising [this], I can today announce that the Government will start a major programme of work exploring the potential of virtual currencies and digital money.
“These alternative payment systems are popular because they are quick, cheap, and convenient – and I want to see whether we can make more use of them for the benefit of the UK economy and British consumers. I also want to be alert to the risks that accompany any new technology. “
The use of alternative currencies like Bitcoin has exploded in recent years, but they are controversial because they take away all control of the creation of a currency from nation states.
While in the UK the Bank of England is responsible for controlling the money supply, according to the New Economics Foundation only 3 per cent is actually created by the Bank with the rest created by commercial banks when they make a loan.