As a prospective UK Bitcoin exchange, we have managed to secure meetings with the FCA, HM Treasury and Number 10 Policy Unit - in fact we’ve managed to get into Downing Street twice to talk about Bitcoin. At the higher levels there does seem to be a genuine desire to engage with and promote new financial technologies such as Bitcoin, and to increase competition in the UK banking and payments sector.
Educating people is still 99% of the battle – explaining what Bitcoin is, dispelling the myths and spelling out the benefits, whilst not ignoring the risks. The VAT issue is an example of the obvious lack of understanding of Bitcoin in some quarters. We were also notified by HMRC that they consider Bitcoin to be a voucher: "most likely a face-value voucher", on which VAT must be paid. For anyone with even a basic understanding of Bitcoin, this obviously doesn't make sense: they aren't issued by anyone, they don't have a "face value" and they can be redeemed for a wide range of goods and services.
If they insist on using the "voucher" classification, the "credit voucher", which can be "redeemed at a number of retailers" and on which VAT is not usually due, seems more appropriate. Hopefully this issue can be resolved quickly by simply switching to this classification.
The upshot of these meetings is that we do now have a commitment from the Treasury that they will seriously consider how Bitcoin might achieve official recognition in the UK. In doing this the government is seeking input from Bitcoin businesses, for example through the FinTech Challenger Business Workshop that NewFinance organised a couple of weeks ago. Any interested parties can submit comments, which will be passed on to the government, see:
A common concern expressed by many fintech businesses at this event was the difficulty in obtaining bank accounts and accessing the UK payments network. This issue isn’t restricted to Bitcoin businesses – at the moment it is almost impossible for any money service business to obtain a bank account in the UK. The current lack of recognition of Bitcoin by financial regulators doesn't help the situation, but it is a wider money laundering issue.
Overall, I am optimistic that the UK will take an enlightened approach to Bitcoin, and that banking and tax issues will be resolved soon. London has become so dependent on the financial services sector that it simply cannot afford to ignore such a revolutionary financial innovation.