Bitcoin was born nine years ago as an anarchic project — a digital currency detached from any central bank. It promised a revolutionary alternative to the existing international payments system, where a central administrator was replaced by a multitude of decentralised digital verification points. Bitcoin and the technology it uses, blockchain, are drifting towards the mainstream. Regulators have their sights set on bitcoin and other crypto assets it inspired. More than 75 of the world’s biggest banks, meanwhile, are turning to blockchain to fight the threat of new payments rivals.
The regulatory attention had become inevitable after bitcoin’s wild swings in value — which at its peak was yo-yoing by as much as 20 per cent in a day but has slumped from $19,000 last December to about $6,500 today. Bitcoin was followed by other types of cryptocurrency, the creation of exchanges, brokers and providers of wallets, or apps for holding and transacting in cryptocurrencies. There has been alarm, meanwhile, over security breaches and the potential use of such networks for money laundering and terrorist financing activities.
In a sign of authorities waking up to the risks, a UK parliamentary committee last week called the cryptocurrency space a “ Wild West” and urged regulation. The New York attorney-general’s office published a report this month denouncing “pervasive” conflicts of interest at many cryptocurrency exchanges and lack of sufficient measures to prevent market manipulation. The EU has included cryptocurrency exchanges and wallets in the fifth iteration of its anti-money laundering directive, due to come into force in 2019. The Financial Action Task Force, a global anti-money laundering organisation, is also looking into the crypto market.