UK next to pledge support for innovation as they look into regulating Bitcoin

UK Finance Minister George Osborne expressed some cautious support for Bitcoin and virtual currencies as the government looks to take

UK Finance Minister George Osborne expressed some cautious support for Bitcoin and virtual currencies as the government looks to take its first steps toward regulation.

The comments were made during a talk on a broader package of measures to strengthen London’s position in financial innovation, and thereby preserve the city’s status as a leading financial center.

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Said Osborne on Bitcoin:

“The government will look at the potential virtual and digital currencies have for achieving positive change and for encouraging innovation in our world leading financial sector, as well as the potential risks.”

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The announcement echoes France’s recent lukewarm statements on its intended approach to regulating Bitcoin. Such expressions have hitherto been rarely made by governments, save for those of the Bitcoin-friendly paradises such as Isle of Man and Jersey.

One major opportunity for financial innovation is “alternative finance”. Financial services make up 8% of the UK’s economy. Conventional banks currently dominate the lending industry. Osborne believes that small and medium businesses (SME’s) are key to economic growth, but they have little recourse when rejected by traditional lenders.

New, alternative forms of financing, such as peer-to-peer (p2p) lending, will help them overcome this hurdle and cut out the middleman. Banks rejecting SMEs for financing would be required to refer them to 3rd parties, who would then try to connect them with challenger banks and alternative lenders.

Bitcoin and its offshoots have become key instruments for crowdfunding initiatives.

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