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Global leaders tackle Bitcoin in Davos

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Global leaders tackle Bitcoin in Davos

Global leaders tackle Bitcoin in Davos
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Global political and financial leaders tackled the tricky subject of cryptocurrences at the World Economic Forum in Davos.

"We encourage fintech and we encourage innovation, but we want to make sure all of our financial markets are safe."

Steven Mnuchin US Treasury Secretary

They were all agreed on the need to regulate, but uncertain about how best to do this.

Concern

Global leaders were united in expressing their concern about the disruptive potential of cryptocurrencies.

British Prime Minister Theresa May used her platform to share her worries: "We should be looking at these very seriously precisely because of the way they can be used, particularly by criminals," she said, whilst her Chancellor of the Exchequer, Philip Hammond, remarked "we should be cautious about Bitcoin and possibly we do need to look at the way we regulate this environment before the amount of outstanding Bitcoin becomes large enough to be systemically important in the global economy."

The regulatory approach

US Treasury Secretary Steven Mnuchin said "We encourage fintech and we encourage innovation but we want to make sure all of our financial markets are safe."

The US wants to standardise the regulatory model around the globe, to help ensure the currency is not used for illicit activities. Within its borders, platforms must register with the Treasury's Financial Crimes Enforcement Network, comply with anti-money-laundering rules, and file reports on suspicious financial activity.

However, a senior Bank of Japan official said that imposing global, across-the-board regulations on cryptocurrency trading would not be easy.

Banks wary

Banking leaders adopted a cagey approach to this thorny issue.

Christine Lagarde, Head of the International Monetary Fund, said that the innovations arising from platforms such as Bitcoin could be useful, but that "the anonymity and lack of transparency and the way in which it conceals and protects money laundering and financing of terrorism, is just unacceptable".

Speaking to Euronews, Cecilia Skingsley, Deputy Governor of Sweden's Central Bank, said "Bitcoin or other versions of crypto assets, or crypto currency, as some like to call it, is something completely different from central bank version money. Crypto assets, as we see them now are not very efficient: they are not a stable store of value, they are not a very well functioning medium of exchange. It's up to each and every individual if they want to invest in that kind of asset or not but is not the kind of money that the Central Bank provides."

What is Bitcoin?

Bitcoin is a virtual currency, controlled by a network of users called "miners". It is dependent on a shared public leger of all transactions, on cryptography, to protect the integrity of the leger, and a series of private "keys" used to sign transactions. As a user you have a virtual wallet, which you use to keep your Bitcoins, and from which you make all transactions with the wallets of other users.

Bitcoin has a good explainer on its own website.