The Treasury Select Committee will today launch an inquiry into cryptocurrencies like bitcoin and distributed ledger technology as it aims to walk the line between regulating digital currencies and supporting innovation.
MPs will examine the role of digital currencies in the UK, including the risks they pose to consumers, business and the government. They will also look into the potential impact of the blockchain on financial institutions, including the Bank of England, and financial infrastructure.
“People are becoming increasingly aware of cryptocurrencies such as bitcoin, but they may not be aware that they are currently unregulated in the UK, and that there is no protection for individual investors," said Nicky Morgan, the chair of the committee.
Regulators have ramped up scrutiny of cryptocurrencies this year as world leaders fear they are being used criminally. The EU's top law enforcement agency earlier this month said money laundering taking place via the unregulated digital cash could amount to as much as £4bn.
The committee will also examine any potential benefits of cryptocurrencies and the technology that underpins them, including how they could create innovative opportunities and to what extent they could disrupt the economy and replace traditional forms of payment.
“Striking the right balance between regulating digital currencies to provide adequate protection for consumers and businesses, whilst not stifling innovation, is crucial. As part of the inquiry, we will explore how this can be achieved," Morgan said.
Labour's Alison McGovern, a member of the select committee, said: “It is time that Whitehall and Westminster understood cryptocurrency better, and thought more clearly about the policy environment for blockchain technology.
"New technology offers the economy potential gains, but as recently demonstrated, it may also bring substantial risks," McGovern said.